PROFESSIONAL BASKETBALL
HEARING
BEFORE THE
SUBCOMMITTEE ON
ANTITRUST AND MONOPOLY
OF THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
NINETY-SECOND CONGRESS
FIRST SESSION
ON
S. 2373
A BILL TO ALLOW THE MERGER OF TWO OR MORE
PROFESSIONAL BASKETBALL LEAGUES
PART 1
Pursuant to
S. Res. 32
Part 4
SEPTEMBER 21, 22 AND 23, 1971
Printed for the use of the Committee on the Judiciary
U. S. Government Documpnts Depositor}
Franklin Pif t- r Library
Boston Pffelic Library
Boston. mA 02116
PROFESSIONAL BASKETBALL
HEARING
BEFORE THE
SUBCOMMITTEE ON
ANTITRUST AND MONOPOLY
OF THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
NINETY-SECOND CONGRESS
FIRST SESSION
ON
S. 2373
A BILL TO ALLOW THE MERGER OF TWO OR MORE
PROFESSIONAL BASKETBALL LEAGUES
PART 1
Pursuant to
S. Res. 32
Part 4
SEPTEMBER 21, 22 AND 23, 1971
Printed for the use of the Committee on the Judiciary
U.S. GOVERNMENT PRINTING OFFICE
78-465 O WASHINGTON : 1972
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C., 20402 - Price $2.25
COMMITTEE ON THE JUDICIARY
JAMES O. EASTLAND, Mississippi, Chairman
JOHN L. McCLELLAN, Arkansas ROMAN L. HRUSKA, Nebraska
SAM J. ERVIN, Jr., North Carolina HIRAM L. FONG, Hawaii
PHILIP A. HART, Micliigan HUGH SCOTT, Pennsylvania
EDWARD M. KENNEDY, Massachusetts STROM THURMOND, South Carolina
BIRCH BAYH, Indiana MARLOW W. COOK, Kentucky
QUENTIN N. BURDICK, North Dakota CHARLES McC. MATHIAS, JR., Maryland
ROBERT C. BYRD, West Virginia EDWARD J. GURNEY, Florida
JOHN TUNNEY, California
Subcommittee on Antitrust and Monopoly
PHILIP A. HART, Michigan, Chairman
JOHN L. McCLELLAN, Arkansas ROMAN L. HRUSKA, Nebraska
SAM J. ERVIN, Jr., North Carolina HIRAM L. FONG, Hawaii
EDWARD M. KENNEDY, Massachusetts STROM THURMOND, South Carolina
JOHN TUNNEY, California EDWARD J. GURNEY, Florida
HOWARD E. O'LEARY, Staff Director and Chief Counsel
Robert Bland Smith, Special Counsel
(II)
CONTENTS
WITNESSES
B arry, Rick III, player with New York Nets, American Basketball Asso- Page
ciation 146
Beaty, Zelmo, player with Utah Stars, American Basketball Association.- 311
DeBusschere, Dave, player with New York Knickerbockers, National
Basketball Association 317
Fleisher, Lawrence, general counsel. National Basketball Players Associa-
tion, accompanied bv Ira Milstein, Weil, Gotschall & Manges, New
York, N.Y : 226
Jones, Larry, player with Floridians, and executive committee member,
American Basketball Association Players Association 138
Kuchel, Thomas H., partner, Wyman, Bautzer, Rothman & Kuchel,
Washington, D.C., accompanied by Edward Weinberg 91
Nathan, Robert, Washington, D.C 155
Noll, Roger G., senior fellow, Brookings Institution, Washington, D.C,
accompanied by Benjamin A. Okner, senior fellow, Brookings Institu-
tion 339
Robertson, Oscar, player with Milwaukee Bucks, National Basketball
Association 302
Sovern, Michael I, dean, faculty of law, Columbia University 322
Spong, the Honorable William B., U.S. Senator from the State of Vir-
ginia 329
EXHIBITS
Public Law 89-800, dealing with investment tax credits and allowing
merger of professional football leagues 2
S. 2373 — Authorizing the merger of professional basketball leagues 11
Amendment proposed by Senator Ervin 12
Oscar Robertson, et al. v. National Basketball Assn. et al, decision on pre-
liminary injunction 24
Article: "Knee Injury Ends Logan's Career," Washington Post, Septem-
ber 10, 1971 .-- 23
Letter to owners of professional basketball teams from Senator Sam Ervin,
September 14, 1971 23
Cases :
Federal Baseball Club of Baltimore, Inc. v. National League of Pro-
fessional Baseball Clubs, et al - — 26
Washington Professional Basketball Corporation, Inc. v. the National
Basketball Association 30
Radovich v. National Football League etal 31
Toolson V. New York Yankees, Inc 36
United States v. International Boxing Club of New York, et al 40
Curtis C. Flood v. Bowie K. Kuhn 44
Lemat Corporation v. Richard F . Barry, III 72
Central New York Basketball, Inc. v. Richard Barnett and Cleveland
Basketball Club, Inc 77
List of exemptions from the antitrust laws 89
Letter to National Basketball Players Association from National Basket-
ball Association, September 2, 1971 -- 95
Merger agreement between National and American Basketball Associa-
tions, May 7, 1971 S8
Written response from Thomas H. Kuchel to questions of antitrust im-
munity for proposed single league 114
(m)
IV
Telegram to players from ABA Players Association executive committee, Page
September 16, 1971 143
Letter to subcommittee from Rick Barry, May 2, 1972 154
Chart: , __
Profit and loss of ABA teams 157
Profit and loss of NBA teams, 1964-65—1970-71 158
Statement of Senator Frank E. Moss 222
Memo : Benefits to players of merger 2bc5
Apficlfs '
"The Balance of Power in Professional Sports," Maine Law Review,
volume 221, 1970 263
"The Super Bowl and the Sherman Act: Professional Team Sports and
the Antitrust Laws," Harvard Law Review, 81, page 418_- 276
Order of court, Oscar Robertson, et al v. National Basketball Association 311
Telegram from Steve Jones, player representative of the Texas Chaparraks
to subcommittee 339
Fiscal statement of Milwaukee Bucks 348
Chart: Illustrative before-tax and after-tax financial status calculations for
a basketball owner in the 70-percent individual income tax 381
A.T*t iolo *
"Pro Sports: A Business Boom in Trouble," July 5, 1971, U.S. News
and World Report , T.--;^---r-- ^^^
"Pro Basketball War: Ugly Mess, Shrewd Agents," Louisville Courier-
Journal , August 8, 1971 __---- 424
"Degree Meant More to Mac Than a Million," Louisville Courier-
Journal, August 9, 1971 _-.- 427
"Warring Basketball's Golden Rule: Do Unto Coaches What Is
Necessary," Louisville Courier-Journal, August 10, 1971 430
"Agents Due Thinner Cuts, More Slices of Pro Basketball Pie After
Merger," Louisville Courier-Journal, August 11, 1971 w'2" ^^"^
Memo of position of National Collegiate Athletic Association on Friday
evening or Saturday telecasts of professional football games during inter-
collegiate football season 435
Player contract, NBA 440
Player contract, ABA 447
Constitution and by laws of NBA 451
By laws of ABA v" oVx"-'; ^
Statement of Senator Wallace Bennett, U.S. Senator from the State ot
Utah 523
THE PROFESSIONAL BASKETBALL LEAGUES
TUESDAY, SEPTEMBER 21, 1971
U.S. Senate,
Subcommittee on Antitrust and Monopoly
OF THE Committee on the Judiciary,
Washington^ B.C.
The subcommittee met, pursuant to notice, at 10 :02 a.m., in Room
318, Old Senate Office Building, Senator Sam J. Ervin, Jr., presiding.
Present : Senators Ervin, Hart, Tunney, and Hruska.
Also present: Howard O'Leary, chief counsel and staff director;
Wilbur D. Sparks, assistant counsel; Peter N. Chumbris, chief
counsel for the minority; Patricia Bario, editorial director; Robert
Bland Smith, Jr., aide to Senator Ervin; and Janice Williams, clerk.
Senator Ervin. The subcommittee will come to order.
I am presiding at the request of the chairman, Senator Hart.
In order that we may understand exactly what is involved here,
on September 30, 1961, Congress enacted Public Law 87-331 which
is also at 75 statute at large, 732, and which is now codified as section
1291 of title XV of the United States Code, which was to exempt
organized professional athletics from the antitrust laws in respect
to making agreements for telecasting games.
The counsel for the committee will have this original statute which
appears as 1291 of the United States Code, title XV, United States
Code, printed at this point in the body of the record.
Then later this statute was amended on November 8, 1966, by
Public Law 89-800, section 6(b)(1), also appearing in the statutes
at large, 1515, and is codified as revised section 1291 of title XV
of the United States Code, and counsel will see that revised statute
is printed at this point in the body of the record.
Then counsel will see that a copy of the bill which proposes to
amend the revised statute is printed at this point in the body of the
record.
(1)
Public Law 89-800
89th Congress, H. R. 17607
November 8, 1966
3in3ict
To suspend the investment credit and the allowance of accelerated depreciation
in the case of certain real property.
Be it enacted hy the Setiate and House of Representatives of the
United States of America in Congress assembled, That (a) section 48 Taxes.
of the Internal Revenue Code of 1954 (relating to definition; special Depreciable
rules) is amended by redesignating subsection (h) as subsection (k), property, m-
and by inserting before such subsection the following new subsections : ^[t suspension"
"(h) Suspension of Investment Credit.— For purposes of this ^^ ^^J^^ gg^ '
subpart — , . , . • 26 use 48.
"(1) General rule.— Section 38 property which is suspension 75 stat. 962.
period property shall not be treated as new or used section 38 26 use 38.
property.
"(2) Suspension period property definfj). — Except as other-
wise provided in this subsection and subsection (i), the term Post , p. 1512.
'suspension period property' means section 38 property —
"(A) the physical construction, reconstruction, or erection
of which begins either during the suspension period or pur-
suant to an order placed during such period, or
"(B) which is acquired by the taxpayer either during the
suspension period or pursuant to an order placed during such
period.
"(3) Binding contracts.— To the extent that any property is
constructed, reconstructed, erected, or acquired pureuant to a
contract which was, on October 9, 1966, and at all times thereafter,
binding on the taxpayer, such property shall not be deemed to
be suspension period property.
"(4) Equipped building rule. — If —
"(A) pursuant to a plan of the taxpayer in existence on
October 9, 1966 (which plan was not sublstantially modified
at any time after such date and before the taxpayer placed
the equipped building in service) , the taxpayer has con-
structed, reconstructed, erected, or acquired a building and
the machinery and equipment necessary to the planned use
of the building by the taxpayer, and
"(B) more than 50 percent of the aggregate adjusted basis
of all the property of a character subject to the allowance for
depreciation making up such building as so equipped is
attributable to either property the construction, reconstruc-
tion, or erection of which was begim by the taxpayer before
October 10, 1966, or property the acquisition of which by the
taxpayer occurred before such date,
then all section 38 property comprising such building as so
equipped (and any incidental section 38 property adjacent to such
building which is necessary to the planned use of the building)
shall be treated as section 38 property which is not suspension
period property. For purposes of subparagraph (B) of the pre-
ceding sentence, the rules of paragraphs (3) and (6) shall be
applied. For purposes of this paragraph, a special pur^wse struc-
ture shall be treated as a building.
"(5) Plant facility RULE. —
"(A) General rule. — If —
" (i) pursuant to a plan of the taxpayer in existence on
October 9, 1966 (which plan was not substantially modi-
fied at any time after such date and before the taxpayer
Pub. Law 89-800 - 2 - November 8, 1966
80 STAT. 1509
placed the plant facility in service) , the taxpayer has con-
structed, reconstructed, or erected a plant facility, and
either
"(id) the construction, reconstruction, or erection of
such plant facility was commenced by the taxpayer be-
fore October 10, 1966, or
"(iii) more than 50 percent of the aggregate adjusted
basis of all the property of a character subject to the
allowance for depreciation making up such plant facility
is attributable to either property the construction, recon-
struction, or erection of which was begun by the taxpayer
before October 10, 1966, or property the acquisition of
which by the taxpayer occurred before such date,
then all section 38 property comprising such plant facility
shall be treated as section 38 property which is not suspension
period property. For purposes of clause (iii) of the pre-
ceding sentence, the rules of paragraphs (3) and (6) shall be
applied.
"(B) Plant facilfiy defined. — For purposes of this
paragraph, the term 'plant facility' means a facility which
does not include any building (or of which buildings con-
stitute an insignificant portion) and which is —
" (i) a self-contained, single operating unit or process-
ing operation,
" ^ii^ located on a single site, and
"(iii) identified, on October 9, 1966, in the purchasing
and internal financial plans of the taxpayer as a single
unitary project.
"(C) Special rule. — For purposes of this subsection, if —
" (i) a certificate of convenience and necessity has been
issued before October 10, 1966, by a Federal regulatory
agency with respect to two or more plant facilities which
are included under a single plan of the taxpayer to con-
struct, reconstruct, or erect such plant facilities, and
"(ii) more than 50 percent of the aggregate adjusted
basis of all the property of a character subject to the
allowance for depreciation making up such plant facili-
ties is attributable to either property the construction,
reconstruction, or erection ot which was begun by the
o taxpayer before October 10, 1966, or property the acqui-
sition of which by the taxpayer occurred before such
date,
such plant facilities shall be treated as a single plant facility.
" (D) Commencement of constbuction. — For purposes of
subparagraph (A)(ii), the construction, reconstruction, or
erection of a plant facility shall not be considered to have
commenced until construction, reconstruction, or erection has
commenced at the site of such plant facility. The preceding
sentence shall not apply if the site of such plant facility is
not located on land.
"(6) Machinery or equipment rule. — Any piece of machin-
ery or equipment —
"(A) more than 50 percent of the parts and components
of which (determined on the basis of cost) were held by the
taxpayer on October 9, 1966, or are acquired by the taxpayer
pursuant to a binding contract which was in effect on such
date, for inclusion or use in such piece of machinery or equip-
ment, and
November 8, 1966 - 3 - Pub. Law 89-800
80 STAT. 1510
"(B) tlie cost of the parts and components of which is not
an insignificant portion of the total cost,
sliall be treated as property which is not suspension period
property.
"(7) Certain lease-back transactions, etc. — Where a person
who is a party to a binding contract described in paragraph (3)
transfers rights in sucli contract (or in the property to which such
contract relates) to another person but a party to such contract
retains a right to use the property under a lease with such other
person, then to the extent of the transferred rights such other
person shall, for purposes of paragraph (3), succeed to the posi-
tion of the transieror with respect to such binding contract and
such property. The preceding sentence shall apply, in any case
in which the lessor does not make an election under subsection
(d), only if a party to such contract retains a right to use the Post , p. 1513.
property under a long-term lease.
"(8) Certain lease and contract obligations. — Wliere, pur-
suant to a binding lease or contract to lease in effect on October 9,
1966, a lessor or lessee is obligated to construct, reconstruct, erect,
or acquire property specified in such lease or contract, any prop-
erty so constructed, reconstructed, erected, or acquired by the
lessor or lessee which is section 38 property shall be treated as
property which is not suspension period property. In the case
of any project which includes property other than the property
to be leased to such lessee, the preceding sentence shall be applied,
in the case of the lessor, to such other property only if the binding
leases and contracts with all lessees in effect on October 9, 1966,
cover real property constituting 25 percent or more of the project
(determined on the basis of rental value). For purposes of the
preceding sentences of this paragraph, in the case of any project
where one or more vendor-vendee relationships exist, such vendors
and vendees shall be treated as lessors and lessees. Where, pur-
suant to a binding contract in effect on October 9, 1966, (i) the
taxpayer is required to construct, reconstruct, erect, or acquire
property specified in the contract, to be used to produce one or
more products, and (ii) the other party is required to take sub-
stantially all of the products to be produced over a substantial
portion of the expected useful life of the property, then such
property shall be treated as property which is not suspension
period property. Clause (ii) of the preceding sentence shall not
apply if a political subdivision of a State is the other party to
the contract and is required by the contract to make substantial
expenditures which benefit the taxpayer.
" (9) Certain transfers to be disregarded. —
"(A) If property or rights under a contract are trans-
ferred in —
" ( i ) a transfer by reason of death, or
"(ii) a transaction as a result of which the basis of
the property in the hands of the transferee is determined
by reference to its basis in the hands of the transferor
by reason of the application of section 332, 351, 361, 371
(a),374:(a),721,or731, 68A stat, 102;
and such property (or the property acquired under such con- ^o stat, 402.
tract) would not be treated as suspension period property in
the hands of the decedent or the transferor, such property
shall not be treated as suspension period property in tne hands
of the transferee.
Pub. Law 89-800 - 4 - November 8, 1966
80 STAT, 1511
"(B) If—
"(i) property or rights under a contract are acquired
68A Stat. 104. in a transaction to which section 334(b) (2) applies,
"(ii) the stock of the distributing corporation was
acquired before October 10, 1966, or pursuant to a bind-
ing contract in effect October 9, 1966, and
"(iii) such property (or the property acquired under
such contract) would not be treated as suspension period
property in the hands of the distributing corporation,
such property shall not be treated as suspension period
property in the hands of the distributee.
"(10) Property acquired from affiliated corporation. — For
purposes of this subsection, in the case of property acquired by
a corporation which is a member of an affihatea group from
another member of the same group —
"(A) such corporation shall be treated as having acquired
such property on the date on which it was acquired by such
other member,
"(B) such corporation shall be treated as having entered
into a binding contract for the construction, reconstruction,
erection, or acquisition of such property on the date on which
such other member entered into a contract for the construc-
tion, reconstruction, erection, or acquisition of such property,
and
"(C) such corporation shall be treated as having com-
menced the construction, reconstruction, or erection of such
property on the date on which such other member commenced
such construction, reconstruction, or erection.
For purposes of the preceding sentence, the term 'affiliated {jroup'
has the meaning assigned to it by section 1504(a), except that all
corporations shall be treated as includible corporations (without
any exclusion under section 1504(b)).
"(11) Certain tangible property constructed during sus-
pension PERIOD AND LEASED NEW THEREAFTER. — Tangible personal
property constructed or reconstructed by a person shall not be sus-
pension period property if —
"(A) such person leases such property after the close of
the suspension period and the original use of such property
commences after the close of such period,
"(B) such construction or reconstruction, and such lease
transaction, was not pursuant to an order placed during the
suspension period, and
"(C) an election is made under subsection (d) with respect
to such property which satisfies the requirements of such
subsection.
"(12) Water and air pollution control facilities. —
"(A) In general. — Any water pollution control facility or
air pollution control facility shall be treated as property
which is not suspension period property.
"(B) Water pollution control facility. — For purposes
of subparagraph (A), the term 'water pollution control fa-
cility' means any section 38 property which —
"(i) is used primarily to control water pollution by
removing, altering, or disposing of wastes, including the
necessary intercepting sewers, outfall sewers, pumping,
November 8, 1966 - 5 - Pub. Law 89-800
^^ ^ ' 80 STAT. 1512
power, and other equipment, and their appurtenances;
and
"(ii) is certified by the State water pollution control
agency (as defined in section 13(a) of the Federal Water
Pollution Control Act) as being in conformity with the 70 Stat. 506;
State program or requirements for control of water pol- 79 stat. 903.
lution and is certified by the Secretary of Interior as 33 use 466 j.
being in compliance with the applicable regulations of
Federal agencies and the general policies of the United
States for cooperation with the States in the prevention
and abatement of water jx)llution under the Federal
Water Pollution Control Act.
"(C) Air pollution control facility. — For purposes of
subparagraph (A), the term 'air pollution control facility'
means any section 38 property which —
"(i) is used primarily to control atmospheric pollu-
tion or contamination by removing, altering, or dispos-
ing of atmospheric pollutants or contaminants; and
"(ii) is certified by the State air pollution control
agency (as defined in section 30'2(b) of the Clean Air
Act) as Deing in conformity with the State program or ii stat. 400;
requirements for control of air pollution and is certified 79 stat. 992.
by the Secretary of Health, Education, and Welfare as 42 use I857h.
being in compliance with the applicable regulations of
Federal agencies and the general policies of the United
States for cooperation with the States in the prevention
and abatement of air pollution under the Clean Air Act.
"(D) Standards for facility. — Subparagraph (A) shall
apply in the case of any facility only if the taxpayer con-
structs, reconstructs, erects, or acquires such facility in fur-
therance of Federal, State, or local standards for the control
of water pollution or atmospheric pollution or contaminants.
"(13) Certain replacement property. — Section 38 property
constructed, reconstructed, erected, or acquired by the taxpayer
shall be treated as property which is not suspension period prop-
erty to the extent such property is placed m service to replace
property which was —
"(A) destroyed or damaged by fire, storm, shipwreck, or
other casualty, or
"(B) stolen,
but only to the extent the basis (in the case of new section 38
property) or cost (in the case of used section 38 property) of such
section 38 property does not exceed the adjusted basis of the
property destroyed, damaged, or stolen,
"(i) Exemption From Suspension of $20,000 of Investment. —
" (1) In general. — In the case of property acquired by the tax-
payer by purchase for use in his trade or business which would
(but for this subsection) be suspension period property, the tax-
payer may select items to which this subsection applies, to the
extent of an aggregate cost, for the suspension period, of $20,000.
Any item so selected shall be treated as property which is not
suspension period property for purposes of tliis subpart (other
than for purposes of paragraphs (4), (5), (6), (7), (8), (9),
and (10) of subsection (h)).
Pub. Law 89-800 -6- Novembers, 1966
80 STAT. 1513
"(2) Applicable rules. — Under regulations prescribed by the
Secretary or his delegate, rules similar to the rules provided by
paragraphs (2) and (3) of subsection (c) shall be applied for
purposes of this subsection. Subsection (d) shall not apply with
respect to any item to which this subsection applies,
"(j) Suspension Period. — For purposes of this subpart, the term
'suspension period' means the period beginning on October 10, 1966,
and ending on December 31, 1967."
76 Stat. 967. (b) Section 48(d) of such Code (relating to certain leased property)
is amended by adding at the end thereof the following new sentences :
"In the case of suspension period property which is leased and is prop-
erty of a kind which the lessor ordinarily leases to one lessee for a
substantial portion of the useful life of the property, the lessor of the
property shall be deemed to have elected to treat the first such lessee as
havmg acquired such property for purposes of applying the last sen-
tence of section 46(a) (2). In the case of section 38 property which
(i) is leased after October 9, 1966 (other than pursuant to a binding
contract to lease entered into before October 10, 1966), (ii) is not sus-
pension period property with respect to the lessor but is suspension
period property if acquired by the lessee, and (iii) is property of the
same kind which the lessor ordinarily sold to customers before Octo-
ber 10, 1966, or ordinarily leased before such date and made an elec-
tion under this subsection, the lessor of such property shall be deemed
to have made an election under this subsection with respect to such
property.''
68A Stat. 51. Sec. 2. Section 167 of the Internal Revenue Code of 1954 (relating
76 Stat. 1034, to depreciation) is amended by redesignating subsection (i) as subsec-
tion (j) and by inserting after subsection (h) the following new sub-
section :
"(i) Limitation in Case of Property Constructed or Acquired
During the Suspension Period. —
"(1) In general. — Under regulations prescribed by the Secre-
tary or his delegate, paragraphs (2), (3), and (4) of subsection
(b) shall not apply in the case of real property which is not
section 38 property (as defined in section 48(a) ) if —
"(A) the physical construction, reconstruction, or erection
of such property by any person begins during the suspension
period, or
"(B) an order for such construction, reconstruction, or
erection is placed by any person during the suspension period.
Under regulations prescribed by the Secretary or his delegate,
rules similar to the rules provided by paragraphs (3), (4), (7),
Ante , p. 1508, (8), (9), and (10) of section 48(h) shall be applied for purposes
of the preceding sentence.
"(2) Exception. — Paragraph (1) shall not apply to any item
of real property selected by the taxpayer if the cost of such prop-
erty (when added to the cost of all other items of real property
selected by the taxpayer under this paragraph) does not exceed
$50,000. Under regulations prescribed by the Secretary or his
delegate, rules similar to the rules provided by paragraph (2) of
section 48(c) shall be applied for purposes of this paragraph.
"(3) Suspension period. — For purposes of this subsection, the
Novembers, 1966 -7- Pub. Law 89-800
80 STAT. 1514
term 'suspension period' means the period beginning on Octo-
ber 10, 1966, and ending on December 31, 1967."
Sec. 3. (a) Section 46(a) of the Internal Revenue Code of 1954 76 Stat. 963.
(relating to determination of amount of credit) is amended by strik-
ing out paragraph (2) and inserting in lieu thereof the followmg:
"(2) Limitation based on amount of tax. — Notwithstanding
paragraph (1), the credit allowed by section 38 for the taxable
year shall not exceed —
"(A) so much of the liability for tax for the taxable year
as does not exceed $25,000, plus
"(B) for taxable years ending on or before the last day
of the suspension period (as defined in section 48(j)), 25 Ante , p. 1513,
percent of so much of the liability for tax for the taxable
year as exceeds $25,000, or
"(C) for taxable years ending after the last day of such
suspension period, 50 percent of so much of the liability for
tax for the taxable year as exceeds $25,000.
In applying subparagraph (C) to a taxable year beginning on or
before the last day of such suspension period and ending aft«r
the last day of such sus^jension period, the percent referred to
in such subparagraph shall be the sum of 25 percent plus the
percent which bears the same ratio to 25 percent as the number
of days in such year after the last day of the suspension period
bears to the total number of days in such year. The Eimount
otherwise determined under this paragraph shall be reduced (but
not below zero) by the credit which would have been allowable
under paragraph (1) for such taxable year with respect to sus-
pension period property but for the application of section
48(h)(1)." Mi> P- 1508.
(b) Section 46(b) (1) of such Code (relating to allowance of carry-
back and carryover of unused credits) is amended —
(1) by striking out subparagraph (B) and inserting in lieu
thereof the following :
"(B) an investment credit carryover to each of the 7 tax-
able years following the unused credit year,"; and
(2) by striking out in the last sentence "8 taxable years" and
"other 7 taxable years'" and inserting in lieu thereof "10 taxable
years" and "other 9 taxable years", respectively.
Sec. 4. The amendments made by this Act shall apply to taxable
years ending after October 9, 1966, except that the amendments made
by section 3(b) shall apply only if the fifth taxable year following the
unused credit year ends after December 31, 1966.
Sec. 5. The Second Liberty Bond Act, as amended, is amended by Retirement and
inserting after section 22 the following new section: savings bonds.
"Sec. 22A. (a) In addition to the United States savings bonds ^° 2^774
authorized to be issued under section 22 of this Act, the Secretary of ^^ ^^^^ ^'
the Treasury, with the approval of the President, is authorized to issue ^^^ ^^^ nsil.
from time to time, through the Postal Service or otherwise. United
States retirement and savings bonds, the proceeds of which shall be
available to meet any public expenditures authorized by law and to
retire any outstanding obligations of the United States bearing interest
or issued on a discount basis. The various issues and series of United
Pub. Law 89-800 - 8 - November 8, 1966
80 STAT. 1515
States retirement and savings bonds shall be in such forms, shall be
offered in such amounts, subject to the limitations imposed by section
72 Stat. 1758; 21 of this Act, and shall be issued in such manner and subject to such
79 Stat. 172. terms and conditions consistent with subsections (b), (c), and (d) of
31 use 757b and this section, including any restrictions on their transfer, as the Secre-
^°'^^- tary of the Treasury may from time to time prescribe.
" (b) (1) Retirement and savings bonds shall be issued only on a dis-
count basis, and shall mature not less than ten nor more than thirty
years from the date as of which issued, as the terms thereof may pro-
vide. Such bonds shall be sold at such price or prices and shall be re-
deemable before maturity upon such terms and conditions as the Secre-
tary of the Treasury may prescribe, except that the issue price of such
bonds, and the terms upon which they may be redeemed at maturity,
shall be such as to afford an investment yield of not more than 5 per
centum per annum, compounded semiannually. The denominations
of such bonds shall be such as the Secretary of the Treasury may from
1 ime to time determine and shall be expressed in terms of their maturity
values. The Secretary of the Treasury is authorized by regulations to
fix the maximum amount of such bonds issued in any one year that
may be held by any one i^erson at any one time, except that such maxi-
mum amount shall not be less than $3,000.
"(2^ The Secretary of the Treasury, with the approval of the Presi-
dent, ]s authorized to provide by regulations that owners of retirement
and savings bonds may, at their option, retain the bonds after maturity
and continue to earn interest upon them at rates which are consistent
with the late of investment yield afforded by retirement and savings
bonds.
"(c) For purposes of taxation, any increment in value represented
by the difference between the price paid and the redemption value
received (whether at, before, or after maturity) for savings and retire-
ment bonds shall be considered as interest. Such bonds snail not bear
the circulation privilege.
"(d) The provisions of subsections (c), (e), (g), (h), and (i) of
55 Stat. 7; section 22 shall, to the extent not inconsistent with the provisions of
59 Stat. 47. this section, apply with respect to retirement and savings bonds issued
31 use 7570. imder this section."
Football leagues, Sec. 6. (a) Section 501(c)(6) of the Internal Revenue Code of
merger. 1954 (relating to exemption of business leagues, boards of trade, etc.)
68A Stat. 163. is ajnended by striking out "or boards of trade" and inserting in lieu
26 use 501. thereof "boards of trade, or professional football leagues (whether or
not administering a pension fund for football players)".
(b) (1) Section 1 of the Act of September 30, 1961 (75 Stat. 732;
15 U.S.C. 1291), is amended by adding at the end thereof: "In addi-
tion, such laws shall not apply to a joint agreement by which the
member clubs of two or more professional football leagues, which are
exempt from income tax under section 501(c)(6) of the Internal
Revenue Code of 1954, combine their operations in expanded single
league so exempt from income tax, if such agreement increases rather
than decreases the number of professional football clubs so operating,
and the provisions of which are directly relevant thereto."
(2) Section 2 of such Act is amended by striking out "described in
section 1" and inserting in lieu thereof "described in the first sentence
in section 1".
interschoiastio (3) Section 3 of such Act is amended (A) by striking out "Section
football con- 1 of this Act" and inserting in lieu thereof "The first sentence of
^^^'^^' section 1 of this Act"; (B) by striking out the word "intercollegiate"
10
November 8, 1966 - 9 - Pub. Law 89-800
80 STAT. 1516
the first and last time it appears in such section and inserting in lieu
thereof "intercollegiate or interscholastic*'; (C) by striking out the
words "daily newspaper of general circulation prior to March 1" and
inserting in lieu thereof "newspaper of general circulation prior to
August 1"; (D) by redesignating paragraph (2) as paragraph (3);
(E) by striking out the word "and" at the end of paragraph (1) and
inserting in lieu thereof the word "or"; and (F) by adding after
paragraph ( 1 ) the following new paragraph :
"(2) m the case of an interscholastic football contest, such contest
is between secondary schools, both of which are accredited or certified
under the laws of the State or States in which they are situated and
olTer courses continuing through the twelfth grade of the standard
school curriculum, or the equivalent, and".
(c) The amendment made by subsection (a) shall apply to taxable
years ending after the date of the enactment of this Act.
Approved November 8, 1966.
LEGISLATIVE HISTORY ;
HOUSE REPORTS: No. 2087 (Cormn. on Ways & Means) and No. 2308 (Comm.
of Conference).
SENATE REPORT No. 1724 (Comm. on Finance).
CONGRESSIONAL RECORD, Vol. 112 (1966):
Sept. 30: Considered and passed House.
Oct. 14: Considered and passed Senate, a/nended.
Got. 20: House agreed to conference report.
Oct. 21: Senate agreed to conference report.
11
92d CONGKESS
IsT Session
S. 2373
IN THE SENATE OF THE UNITED STATES
July 29, 1971
Mr. Hruska (for himself, Mr. Ali.ott, Mr. Bakek, Mr. Beall, Mr. Bennett,
Mr. Brock. Mr. Cook, Mr. Cooper, Mr. Cranston, Mr. Dole, Mr. Domi-
NiCK, Mr. Eastland, Mr. Fannin, Mr. Gravel, Mr. Kennedy, Mr. Met-
CALF, Mr. Moss, Mr. Ribicoff, Mr. Saxbe, Mr. Scott, Mr. Taft, Mr.
Talmadge, Mr. Thurmond, and Mr. Tunney) introduced the following
bill ; which was read twice and referred to the Committee on the Judiciary
A BILL
To authorize the merger of two or more professional basketball
leagues, and for other purposes.
1 Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 That section 1 of the Act of September 30, 1961 (75 Stat.
4 732), as amended by section 6(b) (1) of the Act of
5 November 8, 1966 (80 Stat. 1515) , is further amended by
6 inserting in the second sentence thereof followmg the phrase
7 ''two or more" the phrase "professional basketball leagues
8 combine their operations in an expanded single league, if
9 such agreement does not decrease the number of professional
10 basketball clubs so operating and the provisions of which
11 are directly relevent thereto or a joint agreement by which
12 the member clubs of two or more".
II
12
Senator Ervix. And to facilitate an understanding of what the
amendment does, I have prepared a copy of how the statute woukl
read if the amendment is adopted by the Congress and ask that it
be inserted in the record at this point:
§ 501. Exemption from tax on corporations, certain trusts, etc.
(a) Exemption from taxation. — An organization described in subsection
(c) or (d) or section 401(a) shall be exempt from taxation under this sub-
title unless such exemption is denied under section .j02, 503, or 504.
(c) List of exempt organizations. — The following organizations are referred
to in subsection (a) :
(6) Business leagues, chambers of commerce, real-estate boards, boards of
trade, or professional football leagues (whether or not administering a pension
fund for football players), not organized for profit and no part of the net
earnings of which inures to the benefit of any private shareholder or indi-
vidual.
The antitrust laws, as defined in section 12 of this title or in the Federal
Trade Commission Act, as amended, shall not apply to any joint agreement
by or among persons engaging in or conducting the organized professional
team sports of football, baseball, basketball, or hockey, by which any league
of clubs participating in professional football, baseball, basketball, or hockey
contests sells or otherwise transfers all or any part of the rights of such
league's member clubs in the sponsored telecasting of the games of football,
baseball, basketball, or hockey, as the case may be, engaged in or conducted
by such clubs. In addition, such laws shall not apply to a joint agreement by
which the member clubs of two or more professional basketball leagues com-
bine their operations in an expanded single league, if such agreement does
not decrease the number of professional basketball clubs so operating and
the provisions of which are directly relevant thereto or a joint agreement
by which the member clubs or two or more professional football leagues,
vvhich are exempt from income tax under section 501(c)(6) of Title 26,
combine their operations in expanded single league so exempt from income
tax, if such agreement increases rather than decreases the number of pro-
fessional footbaU clubs so operating, and the provisions of which are directly
relevant thereto. As amended Pub. L. 89-800, 6(b)(1), November 8, 1966,
80 Stat. 1515.
Senator Ervin. Senator Tunney — do you have a statement? My
statement is rather lengthy and I wouldn't want to detain the
Senator.
Senator Tuxney. My. Chairman, I have a statement but I will
make it after yours.
Senator Hruska. And I will make mine after Senator Tunney
makes his.
Senator Ervix. I will make mine.
Today the Senate Antitrust . and INIonopoly Subcommittee begins
hearings on a bill, S. 2373, which seeks to gain Congressional ap-
proval of the proposed merger of the Nation's two major professional
basketball leagues, the National Basketball Association and the
American Basketball Association. Specifically, this legislation would
exempt the merger of two or more professional basketball leagues
from our Nation's antitrust laws.
Many years ago the term chattel was used to denote the legal
status of slaves. That is, they were considered a type of chattel which
was owned as a piece of furniture or livestock was owned. This use
of the term chattel applied to human beings and the condition it
stands for are so abhorrent that we don't even like to acknowledge
that they ever existed. Yet, in a real sense that is what these hearings
are about today— modern peonage and the giant sports trusts.
13
GENERAL BACKGROUND
The clearly stated objectives of our nation's antitrust policy over
the years and the uncompromising language of sections 1 and 2 of
the Sherman Act, places a heavy burden on those who would grant
an antitrust exemption to professional basketball to enable the
merger of the NBA and ABA. Specifically, section 1 of the act
provides that:
Every contract, combination in the form of a trust or otlierwise, or con-
spiracy, in restraint of trade or commerce among tlie several states, or with for-
eign nations, is hereby declared to be illegal. Every person who shall make
any such contract or engage in any such combination or conspiracy, shall be
deemed guilty of a misdemeanor * * *
And section 2 provides that:
Every person who shall monopolize, or attempt to monopolize, or combine
or conspire with any other person or persons, to monopolize any part of the
trade or commerce among the several states, or with foreign nations, shall be
deemed guilty of a misdemeanor * » *
With the notable exception of major league baseball, all profes-
sional team sports are subject to the jurisdiction of the antitrust
laws. In the case of baseball, the Supreme Court ruled in 1922 that
professional baseball was not a subject of commerce and thereby
was exempted from the antitrust laws. Federal Baseball Club of
Baltimore v. National League^ 259 U.S. 200.
This interpretation was tested again in 1953 in Toolson v. Ne-w
York Yankees, 346 U.S. 356, and the Supreme Court refused to
overturn the earlier decision. In doing so, the court took the position
that the Congress, not the court, should decide whether or not pro-
fessional baseball should be subject to the antitrust laws.
Despite this ruling, the courts in subsequent cases ruled that
neither professional basketball nor football could be considered
exempt from the antitrust laws. In 1956 the Federal district court
ruled in Washington Professional Basketball Corporation v. National
Basketball Association, 147 F. Supp. 154, S.D.N. Y. 1956, that:
(The) business of professional basketball conducted on a multistate basis,
coupled with the sale of rights to televise and broadcast games for interstate
transmission is trade or commerce among the several states within the mean-
ing of the Sherman Act.
Following this opinion involving professional basketball, which
was not appealed to a higher court, the Supreme Court in 1957 in
Radovich v. National Foothall League, 352 U.S. 443, held that pro-
fessional football likewise could claim no exemption from the anti-
trust laws. Consequently, there can be no doubt that professional
basketball will be in violation of the antitrust laws if the NBA and
ABA consummate a merger without Congressional approval of an
antitrust exemption.
I digress from my statement at this point and ask to be included
in the record just oifer my statement a decision, Robertson versus the
National Basketball Association (see p. 24) and others Avhich hold that
there is no longer any question that the Sherman Antitrust Act Ap-
plies to sports other than baseball the same way it applies to other en-
terprises in interstate commerce.
78-465 O— 72— pt. 1-
u
Patently, merger or other combination of tlie National Basketball Associa-
tion and the American Basketball Association will eliminate one of two com-
petitors and leave only one surviving major professional basketball league in
the United States. Such a merger raises serious questions as to its legality
under sections 1 and 2 of the Sherman Act.
It is plain from the very arguments of defense counsel that these two
competitors for plaintiffs" services are at this very moment negotiating and
taking steps looking to a "merger." a consolidation, a combination or an agree-
ment, the net effect of which would be to eliminate all competition between
them. That result would work an immediate and irreparable injury on the
plaintiffs.
I will not read the rest of the opinion but the bill to merge the bas-
ketball leagues is the product of that ruling, I assume.
In 1966, the Congress approved legislation authorizing the merger
of the American and National Football Leagues. However, when
we study the legislative history of that action, the conclusion is
unmistakable that the measure was railroaded through the Congress.
The Senate committee having jurisdiction over the bill did not
hold hearings and the bill was subsequently passed by the Senate
without debate. The House Judiciary Committee did not hold hear-
ings; however, the committee made no attempt to explore the many
significant antitrust issues raised by the pro football merger bill.
The bill subsequently passed the House as a rider on a revenue
measure,
I deeply hope that Congress will not follow the precedent it set
in its handling of the pro football merger question. This committee
plans to conduct an extensive and comprehensive inquiry before
final action is taken one way or the other on the proposed basketball
merger bill. The common draft and the option clause which will
result from the merger are issues concerning the economic enslave-
ment of professional basketball players, and are too important for
such ephemeral treatment as was accorded the football merger.
The merger of the basketball leagues has been the subject of heated
controversy between the owners and the players. The owners contend
that the absence of a merger would seriously threaten the future
and economic well-being of pro basketball, given the continuation
of the current bidding war being engaged in by both leagues for
player talent. The })layers, on the other hand, argue that the merger
is anticompetitive and thereby violates the clear intent of our Nation's
antitrust laws.
And most important, the players argue that the merger and the
resulting common draft and option clause would brino- an end to
the current healthy market situation where they can in the spirit
of fair and open competition sell their skills to the highest bidder.
Given these conflicting points of view, the players of the NBA
filed an antitrust suit, Robertson v. National Bai^kethall Association,
in April 1970, contending that the proposed merger between the
NBA and ABA should be blocked because: (1) Such a merger of
two separate and independent leagues would constitute the creation
of a monopoly, thereby enabling the new 28-team leagiie to control,
regulate and dictate the terms upon which professional league bas-
ketball shall be played in the Ignited States; and (2) because such
a merger would specifically eliminate competition in the acquisition
and allocation of player personnel.
15
Upon hearing the arguments of both sides, the court, in essence,
ruled that a merger between the two leagues, without the expressed
approval of the Congress, would violate the antitrust laws. Never-
theless, the court did agree to allow the ABA and NBA to resume:
(1) ]Merger negotiations and; (2) any other meetings for the purpose
of consummating a merger.
THE COMMOX DRAFT
The highest value of civilization is freedom. One of the most
important aspects of our freedom is the freedom to contract. One
of the liberties granted to Americans by the fifth amendment was
the right to engage in freedom of contract, and the lith amendment
which states tliat no person shall be deprived of life, liberty or
property without due process of law, protects the freedom of contract
from impairment by the States.
However, S. 2373 would authorize professional basketball teams
to enter into an agreement under which basketball players could only
negotiate a contract with one particular team. The common draft, as
it is called, is agreed to by the merged leagues and the players are
split up and assigned to teams in tlie absence of the persons to be
affected by the agreement and without their knowledge and consent.
Thus, S. 2373 proposes to rob every man in America who possesses
skill in basketball of the right to sell his skill to the highest bidder
on a free market and negotiate a contract with anybody who desires
to purchase his athletic skill.
S. 2373 would not affect the freedom to contract as to lawyers or
boxers. Lawyers would still have the right to make free contracts
and sell their legal services for what they were worth. The same
thing would apply to prizefighters, doctors, businessmen and other
wage earners.
To my mind, this common draft which the professional basketball
teams are asking for today would be comparable to the newspaper
profession deciding that a college journalism graduate could either
work for the newspaper in Anchorage, Alaska, at the salary offered
or not work at all.
This common draft, of course, is done so that bonuses and other
inducements which the professionals offer for talent may be kept at
a minimum. It is clear to me that the only reason for the institution
of the common draft and the passage of this bill is the pocketbooks
of the owners.
OPTIOX CLAUSES
In their dealings with their players, baseball and football both
have reserve clauses or option clauses which bind the players to that
team and prevent them from bargaining with another team for their
services. The reserve clause in baseball is the worst and the normal
contract for that sport contains a renewal clause which allows the
club management to renew the player's contract for 1 year. In this
contract, the owner can demand a salary decrease of 20 percent and
the player can either sign or not play for anyone. If he signs, the
new contract contains a new renewal contract and thus the club has
a perpetual option on his services.
116
The contracts used in football do not bind outright the player to
the team, but there is an option contract of 1 year. The player can
play out his option with a salary reduction of only 10 percent, and
the new contract does not contain a renewal clause. However, the
bylaws of the football league state that :
Whenever a player, becoming a free agent in such manner thereafter signs
a contract with a different club in the League, then * * * the Commissioner may
name and then award to the former club one or more players from the active,
reserve or selection list — including future selection choices — of the acquiring
club as the commissioner, in his sole discretion, deems fair and equitable ; and
any such decision by the Commissioner shall be final and conclusive.
Article XIII, section 3, NFL constitution.
A writer for the Maine Law Keview last year concluded that the
Commissioner's charges or mandatory compensation for such bar-
gaining by the players were so great that,
Few, if any, football players have been successful in playing out their options
and moving to another club. The end result is that the option clause in foot-
ball has the same effect as the reserve clause of baseball because the player
is still tied to the club with which he first negotiated.
If S. 2373 is debated on the Senate floor, I plan to reopen the
question of the common draft and the option clause as used by
football and baseball by offering amendments dealing with these
matters.
If the merger of the two basketball leagues goes through, the
basketball players will find themselves in the same position as the
football players. That is, they will be perpetually tied to one club.
However, the proposal by the attorneys for the basketball owners
contains an even more subtle element to prevent player bargaining
with teams than the football agreement. Senator Kuchel, in his
statement for the merger, has proposed that the basketball owners
will have an independent arbitration panel to determine the com-
pensation which a team will receive if a former player signs with
another club. The fact remains that there will be a mandatory
compensation factor involved if a player leaves his team after
playing out his contract ; thus, an element of the perpetual owner-
ship of a player by his original signer is still with us.
The price that an acquiring team will have to pay is unknown
as it would only be determined after the player signs his new
contract. This unknown factor will have to discourage a team from
signing any free agents. In short, there is no inducement to trade
in the new proposal and the teams will still boycott any team member
that holds himself out as a free agent. Therefore, even under the
basketball owners' proposal, the players find themselves comparable
to the medieval serf who was bound to the land.
Of course, even with the proposal of the basketball owners, there
is still the problems of potential blacklisting by the league owners'
joint action. Also the common draft remains which limits a youth
out of college to bargaining with only one club or not playing, and
the assignment of contracts which could send a player far from
his home and require that he play there or not practice his profession.
So what the Senate is being asked to do is to sanction a common
draft of all players when they become eligible. In the draft, one
team gets the rights to each player, and that player can only nego-
17
tiate with that team or not play. After the player signs, then he will
have to sign with the same club unless another club bids for his
services. Because the proposal of the basketball owners still contains
a mandatory compensation factor, there will be no incentive for the
other owners to bargain for the services of the player and, practically
speaking, he will have to bargain with his club or none. If, during
his service with his club, he is traded to another club across the
country, he will have to pull up his roots and go or not be allowed
to practice his profession. In no other work in this country is this
practice of selling souls allowed. If a salesman or any businessman
is transferred to another city by his owner, he can still quite and
bargain with other companies m his home area and practice his
trade if he secures employment.
PUBLIC UTILITY STATUS OF MERGED BASKETBALL LEAGUES
The owners of the professional basketball leagues are asking for
what, I believe, is the biggest financial giveaway in this country
since the SST was proposed. If the owners truly believe that it is
in the national interest for them to operate as a monopoly, and
Congress passes S. 2373, I shall propose an amendment, which legis-
lative counsel is presently preparing, to create a Federal commis-
sioner of athletics to regulate all major professional sports — baseball,
football, hockey, and basketball. If Congress authorizes this merger,
it should have the right to determine such things as rates of return,
ticket prices, territories and it should supervise the draft of new
players.
Public utilities in this country enjoy a monopoly situation. Electric
companies, gas companies and telephone companies are all regulated
by the Government in exchange for the Government granting them
monopoly status. The airlines, radio and television are all regulated
in exchange for a Government license. If the owners of professional
sports teams ask to be treated as a monopoly, they should expect
Government regulation. Otherwise the Federal Government, without
any strings, is giving a handful of extremely rich men millions of
dollars and giving them the right to drop chains around the neck of
every professional basketball player and every potential player in
this country.
Washington, D.C. — a casebook study of the monopolies at work.
I believe that an examination of sports in Washington points up the
evils of the big sports monopolies. The simple fact is that the people
of Washington are in danger of being disenfranchised from pro-
fessional sports by the big monopolistic owners. As far as football
is concerned, every home game is sold out and season tickets are
bringing scalpers' prices of $200 and $300 each. Yet, because of the
football merger, the monopolists will not allow the sold-out games
to be televised in this city.
All this takes place while the Kedskins football team uses a U.S.
Government stadium and allows big corporations, hotels and indi-
viduals to own tremendous blocks of tickets to the exclusion of the
little man for whom we are supposed to tje protecting the sport. If
S. 2373 passes, I plan to support Senator Proxmire's bill, S. 1521,
as an amendment to the basketball merger bill which will prevent the
blackout rule from applying when there is a sellout.
The city of Washington has one of the largest black populations
of any city in this country. Also, if you have seen any professional
all-star basketball games recently, you can't help but acknowledge
that the sport is dominated by black athletes. Thus, it would seem
natural that Washington would have a professional basketball team
for the city to take pride in. Well, Washington did have a team,
but its owner, Earl Foreman, was bought out by agreement of the
two leagues and he moved.
As a part of the proposed merger agreement between the two
leagues which I have in my possession, ]Mr. Foreman is to be given
$1,750,000 for leaving the city; and no team other than the Baltimore
Bullets can play in the Xation's Capital because it is in their territory.
The owner of the Bullets, Mr. Abe Pollin, who is with us today,
I understand, contended recently in the Washington Post of Sep-
tember 8 that the Nation's Capital is logically within his franchise
area of 75 miles and when asked by the reporter if he would fight
to keep another team from coming here, he was able to answer with
the assurance of a potential monopolist : Certainly ; Washington and
Baltimore are only 40 miles apart and I consider this within my
franchise rights. So, Congress is being asked to sanctify the exclusion
of professional basketball from Washington. Can this be good for the
sport, the fans or for anyone other than the pocketbook of the
owners of the Bullets ?
I understand that the Bullets might play a few games in College
Park, Md., as a sop to the district; but I believe that cheering for
another city's team is about as exciting as kissing your sister instead
of somebody else's sister, and how is the city's working man going
to afford that trip to Maryland.
Concerning baseball, which enjoys a monopolistic position we are
still not sure if economic necessity will force the Senators to leave
Washington. Negotiations are going on but the primary reason that
the team is losing money was the high price the Senators had to pay
several years ago to join the baseball trust.
So much for our Nation's Capital and sports.
BASKETBALL PLAYERS' SALARIES
Those desiring the basketball merger cite the high salaries paid
to professional basketball players as destroying the leagues. Per-
sonally, I believe that if a basketball player is good enough, he should
be paid the highest price that bidders for his services are willing to
pay. I do not believe that contracts for player services will rise
indefinitely beyond what a team can pay. If they get too high the
teams will just stop bidding beyond what they are able to pay and
the economic force of the marketplace will cause an adjustment.
But simply to say that salaries are too high is to ignore the freedom
to bargain which our economy allows to those who are selling
personal services, and that includes everyone who is selling personal
services — doctors, lawyers, Indian chiefs, ditchdiggers, and prize-
fighters.
19
Actually, professional basketball salaries are higher than that for
other sports, but this just confirms my belief that the monopolistic
conditions which exist in other sports keep the salaries of professional
athletes below what they should be. Also, basketball is drawing
increasingly more fans and basketball players play more games with
less personnel involved than professional football players.
Everyone can use fig-ures to his own advantage, of course, but the
rise in players' salaries makes a very interesting comparison with the
increase in the value of professional basketball team franchises. For
example, from Mr. Nathan's testimony today we find that the average
salary of the three highest players in the NBA for 1967-68 was
$57,000 and in 1970-71 this rose to $92,000, or an increase of 61 per-
cent. The average salary of the rest of the players has gone from
$17,000 to $33,000, which is an increase of 94 percent.
But the salary figures have to be compared to the increases in the
sports franchises. The value of the Boston Celtics as measured by
purchase prices went from $2.8 million in 1965 to $6.2 million in
1969, which is an increase of 121 percent. The value of the Houston
Rockets basketball team has gone from $1.7 million in 1967 to $5.7
million in 1971 which is an increase of 235 percent. Thus, the players'
earnings are really just keeping pace with the value of the clubs.
One of the most telling reasons that a professional athlete should
receive high compensation is the short duration of his playing career.
Excellent players like Earl Monroe and Gus Johnson of the Baltimore
Bullets constantly perform with the fear that their battle-scarred
legs will give away. Just this September 10 there was a story in
the Washington Post about a knee injury ending the career of a
player, Henry Logan, of the Virginia Squires. He had had six
operations on his knee and had only played two seasons of profes-
sional ball, exhibit A attached to this statement. To my mind, the
climate these young men are compensated for playing under is like
that of a highly skilled surgeon performing his daily operations
with the fear that the operation could crush his hands.
Also, as Judge INIacJMahon said in the Robertson case : * * * youth
passes away and consequently, basketball players have limited pro-
fessional careers. In other words, these players are not receiving
these high salaries for life as a lawyer or doctor could expect to do,
but for only a few years are they compensated for their primary
life's work before they are then dumped back into society absent their
skills. Nowhere is the short duration of an athlete's playing life
given colder or more clinical treatment than in the owner's income
statement. There they are treated as capital assets and depreciated as
a car or a machine with a useful life of 5 years.
THE MONOPOLY AND TELEVISIOX
One interesting aspect of this basketball merger is that the tele-
vision networks will be dealing with only one league and that league
will be able to offer a station the monopoly rights to its games. This
will increase the value of the broadcast rights tremenclously and
will put the league in such a strong position in dealing with the TV
stations that it might be well for Congress to ponder an antitrust
20
exemption for the various television companies in order that they
might combine to bargain with the mighty basketball trust. Also,
since competing league broadcasts will be eliminated, there will be
less choice for the television viewer,
^INA^XIAL POSITION OF BASKETBALL CLTJBS
As I have read the statements of the owners, there seems to be
one main reason cited for the merger: Basketball teams are losing
money. In the first place, I don't believe that the losses are as great
as the owners say. All the basketball teams are allowed to treat their
players as capital assets and the owners can depreciate their value
as measured by bonuses and training costs over 5 years after original
signing. When a new owner buys a team, he receives in return for
his purchase price: (1) An exclusive contract to play in a specific
area; (2) player contracts; and (3) the right to play in a certain
stadium. For accounting purposes, the team assigns as much as
possible of the purchase price to the players' contracts and depreci-
ates them. The dramatic effect this depreciation allowances can have
on earnings is shown from the annual report of the Seattle Super-
Sonics, Seattle is an expansion team of the NBA and its player
depreciation would be handled much the same as a purchased team.
In his report to shareholders, president Schulamn states :
You will note our financial report discloses a loss of $219,000 from the period
covering June 1, 1968, to May 31, 1969. In fact, this figures is misleading,
since the Seattle SuperSonics Corporation showed earnings of $46,736 before
amortization of players' contracts for the 1967-68 season and earnings of
$55,133 before amortization of players' contracts for the 1968-69 season.
We have adopted a conservative program of amortizing the cost of the play-
ers over a five-year period. Last season, revenue from further expansion of the
league was not included in income, but rather was assigned to further reduc-
tion of the cost of the players' contracts.
I have indications that other similar situations currently exist.
Recently, I had a chance to look over a list of the owners of the
various basketball teams and what little is publicly known about
their finances. I was greatly impressed by the tremendous amount
of wealth that these men represented. The owners of the Atlanta
Hawks own a big construction company which is building the
stadium in Atlanta. The owner of the Boston Celtics is Ballantine
Beer. The owner of the Buffalo Braves is the largest shareholder of
the National Biscuit Co. The owner of the Cincinnati Royals are
the owners of the Sportservice, the largest concessionnaires in sta-
diums in the United States. The owner of the Detroit Pistons is
the owner of a large piston company.
The owner of the Los Angeles Lakers is a multimillionaire who
owns the Lakers' stadium and who is one of the largest stockholders
of Teleprompter Cable TV Co. The New York Knickerbockers are
owned by Madison Square Garden which is owned primarily by
Gulf & Western Industries.
The Seattle SuperSonics are owned by two men who are chief
executives of the National General Corp. The Kentucky Colonels
are owned by the president of a chain of nursing homes and a former
boss of Kentucky Fried Chicken.
21
Of course, there are more wealthy individuals involved in profes-
sional football but I believe that my point has been illustrated that
very shrewd and wealthy individuals have invested in professional
basketball teams. In some cases, I believe that these individuals have
invested in these clubs to offset their teams' losses due to large de-
preciation allowances against their ordinary income and they will
sell the clubs in the future and have their profit receive preferential
tax treatment as a capital gain. In other cases, the income for the
club might not tell the whole story. The principal owner might be
paying himself a large salary and he might be receiving money for
the concession rights to the game, or money for stadium rental if he
owns the stadium.
In the Curt Flood case, there was testimony that the owner re-
ceived a $2.5 million loan for assigning his team's concession rights
to Sportservice, Inc.
Since there is much confusion about the finances involved in
basketball, I have written to all the club owners and asked them to
provide me with a full financial record of their company and of
their substantial shareholders. Also, I have asked them to provide
me with the financial records of those companies whose operations
are a satellite of their basketball team. I am attaching a copy of my
letter to the owners to this statement for insertion into the hearing
record. I believe that before Congress acts it should be in possession
of the facts; and I am sure the ownei-s will agree with me and
provide this information since they are requesting the U.S. Govern-
ment to allow their team to operate as a part of a monopoly in order
to permit the growth and success of professional basketball. I would
expect the antitrust subcommittee will hire accountants to analyze the
data for the benefit of the Senate.
Actually, even if the basketball teams are losing money, I don't
see that it is any of our business to rescue these teams — one Lockheed
is enough for this year.
I digress from my prepared statement to say that since the state-
ment was prepared, I have agreed to hold in abeyance the request
for these income tax returns and to reconsider that question. How-
ever, we understand the owners of these basketball teams are apply-
ing to Congress for an exemption, for a special privilege, not enjoyed
by American citizens generally, namely, an exemption from the
antitrust laws; and they are asking in effect for some kind of
economic relief at the expense of the freedom of contract of persons
possessing athletic skills in basketball.
Now, before we let anybody on the relief rolls or welfare, we
make them divulge their financial status, and that is the reason I
think— I am subject to being persuaded to the contrary — but I think
before Congress grants relief to the owners of basketball teams m
the form of an exemption from the antitrust laws, on the theory that
they are suffering economic loss, that Congress ought to be able to
appraise the whole situation, and I am subject to persuasion to the
contrary, but I am going to require a little burden of proof before
I will be persuaded because I think that people who ask for special
consideration, that other men be robbed of— I won't use that un-
pleasant word robbed— I say deprived of their freedom for their
22
economic benefit, that Congress is entitled to know whether they are
suffering, really suffering economically.
While Congress is being asked to show great compassion to the
professional basketball teams and allow them to exist as a monopoly
because they are losing money, I am amazed at the lack of com-
passion w^hich the teams are showing each other in their merger
agreement.
The owners admit that the ABA teams are weaker financially
than the NBA teams. Yet, the merger agreement provides: (1) Pay-
ment by each ABA team of the sum of $1,250,000 to the NBA; (2) a
prohibition on the right of the ABA to share in any NBA proceeds
from network television until after 1973; and (3) a continuation of
the present NBA rule which allows all of gate receipts to go to the
home team. Obviously, the NBA teams draw the biggest crowds and
are located in the biggest population centers, so a proposal to not
share gate receipts would be to the financial detriment of the ABA
teams.
This uneven financial treatment becomes even more interesting
when it is compared with the often heard reasons given by the owners
for the common draft and the gimmicks to discourage team switch-
ing such as the mandatory compensation for the team losing a free
agent. The owners say these devices will balance basketball competi-
tion among the various teams and that without these devices a few
teams will end up with all of the players. Well, the owners seem
willing to share the players among teams deprived of talent espe-
cially when it means they can pay them less, but they don't seem
to be in such a hurry to share their money among financially ailing
teams.
CONCLTJSIONS
In basketball, I believe the existence of two leagues has benefitted
everyone. Attendance at games is higher than it has ever been and
basketball is becoming the best attended of all sports. The ABA has
experimented with basketball rules and has in effect changed the
way the sport is played. I believe that this healthy competition has
enriched the sport; it certainly caused more teams to be placed in
more cities than ever before.
In S. 2373, the U.S. Government is asked to sanction a return to
the situation where there was but one league, where there was but
one set of rules, where there was no expansion, where there was no
bidding for player services.
The owners of organized sports are a powerful lobby as we have
seen by the hasty passage of the football merger bill, but I am going
to do everything I can to see that a right that belongs to all Ameri-
cans is protected, namely, the right of a person to negotiate a contract
with anyone who is willing to negotiate with him to sell his skill
for the highest price he can obtain. When it cx)mes to making a
choice between economic enslavement and economic freedom, I stand
by economic freedom, and I hope all members of the Senate will
study these hearings carefully before they vote for S. 2373.
This statement has two exhibits which will be printed in the body
of the record.
23
(Exhibits A and B follow. Testimony resumes on p. 86).
From The Washington Post Sept. 10, 1971
Knee In.tury Ends Logan's 'Career'
squires' guard forced out
Norfolk, Sept. 9 (AP) — The professional "career" of Henry Logan, three-
time small college All-American, finally ended today when he was placed on the
voluntary retired list by the ABA's Virginia Squires.
Dr. Joel A. Mason, team physician, said it was necessary to remove the
remaining part of Logan's right kneecap during surgery last week and that
Logan could not play again.
That operation was the sixth on the right knee of the 6-foot, 185-pound
guard.
The first came in high school to repair torn cartilage. Succeeding repairs
and grafts took away more and more mobility and, when Logan was hurt
during an informal workout with several teammates last week. Dr. Mason
could not give him a seventh life.
NO. 2 DRAFT PICK
During his only full ABA season in 1968-69, Logan averaged 12.5 points per
game for Oakland after coming out of Western Carolina as a second-round
draft choice.
Logan's pro high of 34 points in a game came that season against Indiana
when he also grabbed nine rebounds and had seven assists.
The Oakland franchise then moved to Washington, and Logan was scoring
13 points a game before he fractured that knee in December. He was out for
the year.
The team again moved, to a regional setup in Virginia. Logan was found to
have a fracture line remaining in the joint, so he went out again.
THERAPY NEXT
Logan, 25, had been counted on by coach Al Bianchi to furnish much-
needed depth this season in the Squires' backcourt.
"It seems as if all the bad things happened to the really nice guy," Bianchi
said today. "When he was healthy and able to play, there was no one quite like
Henry Logan."
Logan now is in a Norfolk hospital with his leg in a cast. It will be about six
weeks before he can begin therapy.
Logan has been offered a job with the Memphis, Tenn., recreation depart-
ment, and has also indicated an interest in working for "Stop," a Tidewater
Virginia program aimed at helping young blacks get jobs.
If Logan takes the latter position, the Squires say they will use him as a
special scout.
U.S. Senate
Washington, D.C., September llf, 1971.
President, Atlanta Hawks
Atlanta, Ga.
Dear Mr. President, As you are no doubt aware, I will chair the initial
round of hearings scheduled to begin on September 21, 1971, before the Anti-
trust Subcommittee of the Senate Judiciary Committee on S. 2373, which
would authorize the merger of the two existing professional basketball leagues.
It is my understanding that the basic rationale of the proponents of this
merger is an economic one. It has been alleged that certain existing teams,
particularly in the American Basketball Association, are at present operating
at substantial financial losses. Therefore, in order to gain a better understand-
ing of the economic issues involved, I am requesting that each team in the
NBA and the ABA, including your own, submit to my office prior to September
21, 1971, copies of their respective certified audited balance sheets, income
statements, earned surplus statements, and source and application of funds
statements for each of the last four years. The same financial material should
also be submitted for the most current period available whether or not certified
24
and audited. Additionally, a copy of each material contract and contingent
liability should be submitted.
Of course, the figures for the clubs are only part of the owners' total
financial picture and would be meaningless unless they can be related to the
financial plan of the clubs substantial shareholders. Therefore, I respectively
request that you specify the interest in your team in terms of both numbers of
shares and percentages of total ownership of each officer, director, and owner
of at least a 10% interest, of record or beneficial. Additionally, I request copies
of the income tax returns for each of the past four years of any owner who
presently has at least a 10% interest in your team, either of record or bene-
ficial. If during the past four years more than a 20% interest in your franchise
has been sold in a single transaction, I request the details of the sale, including
the price.
Finally, in order for the Subcommittee to appreciate the full financial
picture of a sports enterprise, please submit the same information requested
above for every other business entity which derives revenue or owns assets
whose operations are associated with your professional basketball team, such
as broadcasting revenue, concession revenue, endorsement and trade name use
revenue ; and whose owners or employees include either an oflicer, director, or
an owner of at least a 10% interest in your club, if record or beneficial.
Since you are requesting the U. S. Government to allow your team to operate
as part of a monopoly in order to permit the growth and success of professional
basketball, I assume that you will have no objection to providing this informa-
tion.
Thank you for your attention.
Sincerely yours,
Sam J. Ervin, Jr.
Court Decisions
Robertson v. National Basketball Association
[H 73,282] Oscar Robertson, et al. v. National Basketball Assn., et al.
In the United States District Court for the Southern District of New York.
No. 70 Civ. 1526. Dated April 11, 1970.
Excerpt of transcript of proceedings.
SHEaiMAN ACT
Combinations and Conspiracies — Construction of Sherman Act — Interstate
Commerce — Application of Sherman Act to Professional Basketball.— There is
no question that the Sherman Act applies to sports other than baseball in
the same way it applies to other commercial enterprises engaged in interstate
commerce. Accordingly, professional basketball players, challenging the pro-
posed merger of two professional basketball leagues and alleging that the
clubs of one league conspired to suppress competition in the acquisition of
players, were not denied a preliminary injunction to maintain the status quo
pending the disposition of their antitrust suit on the ground that their sport
was exempt.
See Basic Rules, Vol. 1, K 685.62.
Private Suits — Basketball — Antitrust Laws — Merger — Preliminary Injunc-
tion — Irreparable Injury — Preservation of Status Quo. — Professional basket-
ball players, challenging the proposed merger of two professional basketball
leagues, were entitled to a preliminary injunction halting the merger pending
the disposition of their suit on the merits. The proposed merger would elimi-
nate all competition between the two leagues and thus players who are now
free to negotiate for future contracts with either of the rivals would instantly
lose that competitive advantage if one of the rivals is eliminated by merger.
The threat of irreparable injury to the plaintiffs thus seemed clear enough.
Furthermore, should a merger occur and later be found to be illegal under
the Sherman Act, the court would be confronted with the unscrambling com-
plexities inherent in divestiture that might well work severe hardship upon
innocent parties.
See Private Enforcement and Procedure, Vol. 2, T[ 9312.
For the plaintiffs: Weil, Gotshal & Manges, by Ira Millstein and Peter
Gruenberger (of counsel).
25
For the defendants: Proskauer Rose Goetz & Mendelsohn, by Jacob Imber-
man and Howard Gans (of counsel), for the National Basketball Assn.;
Roth, Carlson, Kwit, Spengler & Mallin, by Robert S. Carlson and Sommer.
Tinkham, Bernard & Freiberger, by William Bernard, for the American
Basketball Assn.; Simpson, Thacher & Bartlett, by Roy Riordan (of counsel),
for the Madison Square Garden Center, Inc.
Excerpt of transcript of proceedings before Lloyd F. MacMahon, D. J.
*******
[On Motion for Temporary Restraining Order]
THE COURT: There is no longer any question that the Sherman antitrust
law applies to sports other than baseball in the same way it applies to other
commercial enterprises engaged in interstate commerce. Radovich r. National
Football League [1957 Trade Cases H 68,628], 352 U. S. 445 (1957).
Patently, merger or other combination of the National Basketball Asso-
ciation and the American Basketball Association will eliminate one of two
competitors and leave only one surviving major professional basketball league
in the market of professional basketball in the United States. Such a merger
raises serious questions as to its legality under Sections 1 and 2 of the
Sherman Act.
It is plain from the very arguments of defense counsel that these two com-
petitors for plaintiffs' services are at this very moment negotiating and taking
steps looking to a "merger," a consolidation, a combination or agreement, the
net effect of which would be to eliminate all competition between them. That
result would work an immediate and irreparable injury on the plaintiffs.
Some of the players who are members of the class plaintiffs purport to
represent have already signed contracts to play in the rival league in future
seasons. Thus, players who are now free to negotiate for future contracts
with either of the rivals would instantly lose that competitive advantage if
one of the rivals is eliminated by merger or other combination.
When we consider that youth passes away and consequently basketball
players have limited professional careers, the threat of immediate and irrep-
arable injury to the plaintiffs seems clear enough. Equitable relief is war-
ranted in the circumstances to maintain the status quo of the present com-
petitive structure at least until the issues of fact and questions of law raised
in this lawsuit can be more fully presented, considered and decided on a
hearing of plaintiff's application for a preliminary injunction pending trial.
This is not to suggest that the Court questions in any way the good faith
of defense counsel's representations that there will not be a merger forthwith.
All too often, however, lawyers cannot control their clients, particularly
where there are as many parties involved as there are here.
The plaintiffs have made a suflScient showing of reasonable grounds to be-
lieve that a merger is imminent, as appears from the many exhibits attached
to their papers. Should a merger occur and later be found to be illegal under
the Sherman Act, the Court would be confronted with the unscrambling com-
plexities inherent in divesture which might well work severe hardship upon
innocent parties.
These considerations, plus the threat of immediate and irreparable injury
to the plaintiffs, should the merger occur, weigh heavily on the side of grant-
ing a temporary restraining order.
Accordingly, the Court will grant the temporary restraining order and, on
consent of counsel, will set the hearing on the application for a preliminary
injunction for two weeks.
70 Civ. 1526
United States District Court, Southern District of New York
Oscar Robertson, et al., plaintiffs,
V.
National Basketball Association, et al., defendants
Order
This cause having come on to be heard by plaintiffs' motion for a pre-
liminary injunction, the Court, upon the complaint and aflSdavits of Lawrence
Fleisher and Peter Gruenberger, Esqs., and upon due deliberation, hereby
enters its order as follows :
26
1. Pending the hearing and trial of this action defendants, their agents,
servants, employees, attorneys and all persons acting in concert with them
are enjoined :
(a) from reaching agreement on, effectuating or consummating any merger,
consolidation, acquisition or combination by any means between defendant
National Basketball Association ("NBA") and defendant American Basketball
Association ("ABA") or any of their member teams ;
(b) from entei'ing into, implementing or carrying out any form of an
express or implied non-competition agreement pending any such formal
merger, consolidation, acquisition or combination, whereby no club in one
league will attempt to employ, bid for or negotiate with any player from the
other league ;
(c) from refusing in any way to attempt to employ, bid for or negotiate
with any player on the ground that the player is from another league, or by
reason of any such agreement or understanding, express or implied, as is
referred to in paragraph (b) above. While in any proceeding alleging a vio-
lation of this paragraph (c) the ultimate burden of proof shall remain upon
plaintiffs, the person or persons so charged shall have the burden of going
forward with evidence that any such refusal was not by virtue of anything
prohibited by this paragraph (c).
(d) from holding or agreeing to hold a common draft of college players;
allocating or agreeing to allocate any players, except with respect to intra-
league college, expansion or supplemental drafts and intra-league player
contract assignments; or fixing a schedule for or playing any games (except
pre-season games) between teams of either league; and
(e) from taking any further steps to effectuate or consummate any of the
acts prohibited in paragraphs (a)-(d) above.
2. Nothing contained in this order shall be deemed to prohibit or prevent
defendants, their agents, servants, employees, attorneys and all persons
acting in concert with them from associating together for the purpose of
petitioning or soliciting Congress to enact legislation with respect to or con-
cerning any merger, consolidation, acquisition, or combination between the
NBA and the ABA or any of their member teams. In particular, defendants,
their agents, servants, employees, attorneys and all persons acting in concert
with them shall not be prohibited from :
(a) meeting among themselves or with others to discuss, negotiate and
jointly agree upon a proposal of merger, consolidation, acqvaisition or com-
bination between the NBA and ABA or any of their member teams solely
for the purpose of petitioning Congress for :
(i) an exemption from the antitrust laws with respect to such proposal, or
( ii ) related legislation with respect to such proposal ; or
(b) carrying on their regular course of business.
Dated : New York, New York, May 4, 1970.
/S/ Charles H. Tenney,
United States District Judge.
Federal Baseball Club of Baltimore, Inc. v. National
League of Proffessional Baseball Clubs, et al.
error to the court of appeals of the district of columbia
No. 204. Argued April 19, 1922.— Decided May 29, 1922.
1. The business of providing public baseball games for profit between clubs of
professional baseball playei-s in a league and between clubs of rival leagues,
although necessarily involving the constantly repeated traveling of the players
from one State to another, provided for, controlled and disciplined by the
organizations employing them, is not interstate commerce. P. 208.
2. Held that an action for triple damages under the Anti-Trust Acts could
not be maintained by a baseball club against baseball leagues and their constit-
uent clubs, joined with individuals, for an alleged conspiracy to monopolize
the baseball business resvilting injuriously to the plaintiff. P. 209.
269 Fed. 681 ; 50 App. D.C. 165, affirmed.
Error to a judgment of the Court of Appeals of the District of Columbia
reversing a judgment for triple damages under the Anti-Trust Acts recovered
by the plaintiff in error in the Supreme Court of the District and directing
that judgment be entered for the defendants.
'27.
Mr. Charles A. Douglas and Mr. William L. Marbury, with whom Mr. L.
Edwin Goldman and Mr. William L. Rawls were on the briefs, for plaintiff in
error.
Defendants are voluntary associations and corporations engaged upon a vast
scale, involving the investment of millions of dollars, in the business of provid-
ing, by the transportation from State to State of baseball teams and their
necessary attendants and equipment, exhibitions of professional baseball. The
court is not concerned with whether the mere playing of baseball, that is the
act of the individual player, upon a baseball field in a particular city, is by
itself interstate commerce. That act, it is true, is related to the business of the
defendants, but it can no more be said to be the business than can any other
single act in any other business forming a part of interstate commerce.
The question with which the court is here concerned is whether the business
in which the defendants were engaged when the wrongs complained of occurred,
taken as an entirety, was interstate commerce, or more accurately, whether
the monopoly which they had established or attempted to establish was a
monopoly of any part of interstate commerce.
At the foundation of the business of one of these leagues — in its primary
conception — is a circuit embracing seven different States. No single club in that
circuit could operate without the other members of the circuit, and accord-
ingly in the very beginning of its business the matter of interstate relationship
is not only important but predominant and indispensable.
Each game symbolizes a contest of skill between the two cities that have been
brought together by means of interstate communication and travel. Each team
of each club in the league carries with it, and it is essential to the profit of the
enterprise that it should carry with it. its representative character; it symbo-
lizes the great city that it represents to those assembled to witness the contest.
In addition to this representative city and state aspect, there is also the ele-
ment of intersectional rivalry. Experience has shown that the game is most
largely patronized when clubs are so located as to provide a contest for
supremacy between the Eastern and Western sections of the country.
It is necessary to distinguish between baseball as a sport, that is, where it is
played merely as a means of phvsical exercise and diversion, and this business
of providing exhibitions of professional baseball. The business of Organized
Baseball represents and has represented for many years, an investment of
colossal wealth. Defendants who dominate Organized Baseball are not engaged
in a sport. They are engaged in a money-making business enterprise in which
all of the features of any large commercial undertaking are to be found. When
the teams of the National or American Leagues or of any other league are sent
around the circuit of the league, they go at the direction of employers whose
business it is to send them, and whose profits are made as a result of that
business operation.
When the profit-making aspect of the business is examined, it will be found
that the interstate element is still further magnified. The vast investment of
capital which has been made in it is required, among other things, in order to
provide a place at which the teams in the league may play their contests. Each
club has a ball park, with stands erected upon them, sometimes, as in the case
of a major league club, costing several millions of dollars. Every club in the
league earns its profit not only by the drawing capacity of its team at home,
but also by that of the teams of the clubs which its team visits in the various
cities in the league. The gate receipts in all of the cities in which the clubs are
located are divided according to a definite proportion, fixed by agreement
between the club of the city in which the game is played and the club
employing the visiting team.
In no other business that can now be recalled is there such a close interrela-
tionship and interdependence between persons in one State and persons in
another. The personality, so to speak, of each club in a league is actually pro-
jected over state lines and becomes mingled with that of the clubs in all the
other States. The continuous interstate activity of each is essential to all the
others. The clubs of each league constitute a business unit embracing territori-
ally a number of different States. While each club has, of course, a local legal
habitat, yet from a practical business standpoint is is primarily an ambulatory
organization.
It is difficult to perceive the relevancy of any discussion about an article of
commerce in this case. Commerce may be carried on in one of its forms by
traffic in articles of merchandise, but there are countless forms in which it
may be carried on without traffic in such articles. Gibbons v. Ogden, 9 Wheat.
^^?; i^ ilso difficult to discern the relevancy of the contention that personal
effort is not an ar^^^^^^^ of commerce. Personal effort, while it may not be an
a?tTcSe of Commerce is often commerce itself, but we are not concerned with
n?v such QueSn here. It may be passed by saying that it has been adjudicated
any such '1^^^|,\«" ,;fl;^,^' ^..^^ .j'h U S 308, that interstate commerce may be
^?ea?ed bv he me^'e act of^perso'n in allowing himself to be transported from
onTstate'to L'tilr? withouS any personal effort and further that i^ is very
riiffipnlt to see how International Textbook Co. v. Pigg, 21* U.S. 91, could have
be?n deckled as it was, except upon the principle that the mere exchange of
insTruSrind ^nf ormktion, \vhich is about ^s pure^ a ma" r^^^^^^^^^^
effort as anything that can be imagined, may be a subject of interstate com
""T/n-ansactions in interstate commerce were to be judged by their isolated
nlt/m^te results as tSe defendants seek to separate the act of a Player in
Ihrn^in/a iSll upon a ball field from all the steps which are taken to bring
heZn Plaver in ?ie due course of business from other States, of course their
%tntp<t ^'21 TJ S 1 68: Swift d Co. v. United States, 196 U.S. 37o.
?n the business now under consideration throughout the playing season the
ban team^ thetr atrendants and paraphernalia, are in constant revolution
nrnnnr^ nreestablished circuit. Their movement is only interrupted to the
Emmmmmm
y.iofAfi Thp interruption in interstate movement is nothing like as ^reai <i&
Union TeUgraph Co.. 96 U.S. 1 ; United "^'^'Zl-J^Tv Fo^tfr "47 U S lOs!
mmmmmmm
me laSk are sent out and are received throughout the oountry^
.r±dr;;unrr?-s z^r^'s^ 'ssj^jstl:'^ i re a.
''?heSlnSenl"''i.S"r\hemilves not determinative of the question o£
whether "rnot he hnsiness is interstate in clMraoter. J'?';,"f° XtreteeS
Connection with its main texture.. eroyi,<><<<z.Jhe inM, ot -'»' f f^";'" ,\''«e
S'Lr„ViSsS.I'^^T^rris''r;;Sdora'it^%};LT„Ti.ch defendants
°"Ti!e?|S'ement and comhination entered into a,^
mMmmmmm
of the Sherman Act.
29
There is no testimony in tins case legally sufficient to show that the plaintiff
lias waived its right to recover damages under the Sherman Act.
Mr. George Wharton Pepper, with whom Mr. Benjamin S. Minor and Mr.
Samuel M. Clement, Jr.. were on the brief, for defendants in error.
Organized Baseball is not interstate commerce and does not constitute an
attempt to monopolize within the Sherman Act.
Personal effort, not related to production, is not a subject of commerce ;
and the attempt to secure all the skilled service needed for professional base-
ball contests is not an attempt to monopolize commerce or any part of it.
Clayton Act, § 6; Paul v. Virginia, 8 Wall. 168; Hooper v. California, 155 U.S.
648 ; Metropolitan Opera Co. v. Hammerstcin, 147 X.Y. S. 532 ; In re Duff, 4 Fed.
519; In re Oriental Society, 104 Fed. 975; People v. Elaw, 106 N.Y. S. 341. The
Department of Justice has ruled that the business conducted by Organized
Baseball was not in violation of the Sherman Act; and also that the business
of presenting theatrical entertainments is not commerce. Distinguishing:
International Textbook Co. v. Pigg, 217 U.S. 91 ; and MarienelU v. United
Booking Offices, 227 Fed. 165. The only case in which the question whether
Organized Baseball is within the Sherman Act has been directly passed upon
is that of lUnerlcan Baselall Club of Chicago v. Chase, 149 N.Y. S. 6, in which
the court answered the question in the negative.
Congress has not imposed a penalty upon the transportation of players for
baseball purposes, and therefore Hoke v. United States, 227 U.S. 308, is not in
point. While Congress may regulate the movement of persons in interstate com-
merce, when it lias not regulated movement as such, the doing of an act essen-
tially local is not converted into an interstate act merely because people came
from another State to do it.
Mr. Justice Holmes delivered the opinion of the court.
This is a suit for threefold damages brought by the plaintiff in error under
the Anti-Trust Acts of July 2, 1890, c. 647. S 7. 26 Stat. 209, 210, and of October
15, 1914, c. 323, § 4, 38 Stat. 730, 731. The defendants are The National League
of Professional Base Ball Clubs and The American League of Professional Base
Ball Clubs, unincorporated associations, composed respectively of groups of
eight incorporated base ball clubs, joined as defendants ; the presidents of the
two Leagues and a third person, constituting what is known as the National
Commission, having consideraltle powers in carrying out an agreement between
the two Leagues ; and three other persons having powers in the Federal League
of Professional Base Ball Clubs, the relation of which to this case will be
explained. It is alleged that these defendants conspired to monopolize the base
ball business, the means adopted being set forth with a detail which, in the
view that we take, it is unnecessary to repeat.
The plaintiff is a base hall club incorporated in Maryland, and with seven
other corporations was a member of the Federal League of Professional Base
Ball Clubs, a corporation under the laws of Indiana, that attempted to compete
with the combined defendants. It alleges that the defendants destroyed the
Federal League by buying up some of the constituent clulis and in one way or
another inducing all those clubs except the plaintiff to leave their League, and
that the three persons connected with the Federal League and named as
defendants, one of them being the President of the League, took part in the
conspiracy. Great damage to the plaintiff is alleged. The plaintiff obtained a
verdict for $80,000 in the Supreme Court and a judgment for treble the
amount was entered, but the Court of Appeals, after an elaborate discussion,
held that the defendants were not within the Sherman Act. The appellee, the
plaintiff, elected to stand on the record in order to bring the case to this Court
at once, and thereupon judgment was ordered for the defendants. 50 App. D.C.
165 ; 269 Fed. 681, 888. It is not argued that the plaintiff waived any rights by
its course. Thom.'^en v. Cayser, 243 U.S. 66.
The decision of the Court of Appeals went to the root of the case and if cor-
rect makes it unnecessary to consider other serious difficulties in the way of
the plaintiff's recovery. A summary statement of the nature of the business
involved will be enough to present the point. The clubs composing the Leagues
are in different cities and for the most part in different States. The end of the
elaborate organizations and sub-organizations that are de.scribed in the plead-
ings and evidence is that these clubs shall play against one another in public
exhibitions for money, one or the other club crossing a state line in order to
make the meeting possible. When as the result of these contests one club has
won the pennant of its League and another club has won the pennant of the
78-465— 72— pt. 1 3
30
other Leawe there is a final competition for the world's championship between
?iese two Of course the scheme requires constantly repeated travelling on the
mrt of the clubs, which is provided for, controlled and disciplined by the
S?gan?zations? and this it is said means commerce among the States. But we are
nf nnlnion that the Court of Appeals was right. «= • „
S business is i^ving exhibitions of base ball, which are purely state affairs.
It is true thit in order to attain for these exhibitions the great popularity
tLt thev have Sh^eved. competitions must be arranged between clubs from
nfferlntcitfes and States. But the fact that in order to give the exhibitions
hf Leagues muTinduce free persons to cross state lines and must arrange
and mv for their doing so is not enough to change the character of the biisi-
Sess According to the distinction insisted upon in Hooper jCaUforma 155
US 648 655 the transport is a mere incident, not the essential thing That to
which it is evident the exhibition, although made for money would not be
?aned trade or commerce in the commonly accepted use of those words. As it is
mitbv the defendants, personal effort, not related to production, is not a sub-
feet of commence That which in its consummation is not commerce does not
become commerce among the States because the transportatK)n that we have
mentTonedTkes place. To repeat the illustrations given by the Coiirt below, a
?^m of la wveS sending out a member to argue a case, or the Chautauqua
fecTure bureau sending out lecturers, does not engage in such commerce because
'"'llTeVelr.TtL'ZlSm^^^^^^^^ to be described in the same way
and The restrfctions b? contract that prevented the plaintiff from getting
Xyerf to break their bargains and the other conduct charged against the
SSnts were not an interference with commerce -ong^th^e^St^a^^
The Washington Professional Basketball Corporation,
Inc., Plaintiff,
v.
Tttf National Basketball Association, an Unincorporated Association,
M.T;RtcEPODOL?FF PRESIDENT AND TREASURER, NATIONAL BASKETBALL ASSOCIA-
TION, BOSTON CELTICS BASKETBALL ClUB, INC, ET AL., DEFENDANTS
United States District Court, S. D. New York., Dec. 11, 1956.
A^Hnn for damages for alleged interference by defendant professional basket-
baf assocfatioranrclubs wfto plaintiff's claimed right to engage in profes-
sioLf basketball business on ground of federal anti-trust statute, common law
tn^rlnS unlivful in^^^ with contract between plaintiff and another.
The defenSaSr moved to Siss. The United States District C^urt, Sugar-
man, J heirtLrcomplaint stated a claim upon which relief could be granted.
Motions to dismiss denied.
^' Sn^eTs''t7professionai basketball conducted on a multistate basis coupled
wi?h the sale of ?iSts t^ televise and broadcast games for interstate transmis-
Son is trade or ciLmerce among the several states within the meaning of the
Sherman Act. Sherman Anti-Trust Act, § 1 et seq., 15 U.S.C.A. § 1 et seq.
2. Monopolies — 28(6.2) _ i ..von tooT«
It. flotion bv prospective purchaser of defunct professional basketball team
ag'a?ns\Trofeii?iiaPbfskeVall association and its ^^}^^^^l^^
oL« fnr fllk^o-pd interference with purchaser's claimed right to engage m pro
granted. Sherman Anti-Trust Act, § 1 et seq., lo L.fe.C.A. ^ 1 et seq.
3. Monopolies— 28(6.7) . , ^4-K„n toom
mmm^mm
31
had done everything required of him to acquire remnants of defunct profes-
sional basketball team and was prevented from completing acquisition solely
by alleged illegal conspiracy, showed prospective purchaser had standing to sue.
Sherman Anti-Trust Act, § 1 et seq., 15 U.S.C.A. § 1 et seq.
4. Courts— 289
TVhere action was brought for damages for alleged illegal interference by
defendants with plaintiff's right to engage in certain business, based upon fed-
eral anti-trust statute, common law tort, and unlawful interference with a
contract, federal District Court had right to decide all questions in case even
though it might ultimately decide federal question adversely to the plaintiff.
Sherman Anti-Trust Act, § 1 et seq., 15 U.S.C.A. § 1 et seq.
Simpson, Thacher & Bartlett, New York City, for defendants National Bas-
ketball Ass'n, Maurice Podoloff, Boston Celtics Basketball Club, Inc., Zollner
Machine Works. Inc., Minneapolis Basketball, Inc., Madison Square Garden
Corp.. and Syracuse Professional Basketball Club, Inc.
Paul, Weiss, Rifkind, AVharton & Garrison, New York City, for plaintiff.
Sugarman, District Judge.
[1, 2] The business of professional basketball, as conducted by The National
Basketball League and its constituent teams on a multistate basis, coupled with
the sale of rights to televise and broadcast the games for interstate transmis-
sion, is trade or commerce among the several States within the meaning of the
Sherman Act.^ 15 U.S.C.A. § 1 et seq. The allegations of the complaint which,
on these motions to dismiss must be deemed true, that plaintiff was denied
participation therein by the defendants' alleged illegal conspiracy, states a
claim upon which relief can be granted.
[3] Plaintiff has standing to sue. Even though it never actually owned a
playing team, the complaint alleges, which must on this motion be accepted
as true, that plaintiff did everything required of it to acquire the remnants of
the defunct Baltimore Bullets and was prevented from completing that acquisi-
tion solely by the defendants' alleged illegal conspiracy complained of. The
denial of a temporary injunction in a prior suit - was based on "a very definite
issue of fact as to whether, in fact, any binding contract was ever entered
into" and "the absence of evidentiary proof that such contract was entered
into" in the light of the defendants' denial there "that any such contract was
entered into". That decision did not hold for all purposes that plaintiff was not
a party aggrieved under the anti-trust laws.
[4] The complaint seeks damages on a cause of action for an alleged illegal
interference by defendants with plaintiff's claimed right to engage in the pro-
fessional basketball business upon several grounds: federal anti-trust statute;
common law tort ; unlawful interference with a contract between plaintiff and
another. Thus the case is one wherein this court has the right to decide all
questions in the case even though it might ultimately decide the federal
question adversely to the plaintiff.^
Motions by defendants National Basketball Association, Podoloff, Madison
Square Garden Corp., Inc. and Syracuse Professional Basketball Club, Inc. to
dismiss the first claim and by defendants Boston Celtics Basketball Club, Inc.,
Zollner Machine Works, Inc. and Minneapolis Basketball, Inc. to dismiss the
complaint are severally denied.
It is so ordered.
Radovich v. National Football League et al.
certiorari to the united states court of appeals for the
ninth circuit
No. 94. Argued January 17, 1957. — Decided February 25, 1957
Alleging that respondents conspired to monopolize and control professional
football in violation of the Sherman Act, petitioner sued them under § 4 of the
Clayton Act for treble damages and injunctive relief. He alleged, inter alia,
1 United States v. International Boxing Club, 348 U.S. 236, 75 S.Ct. 259, 99 L.
Bd. 290.
2 Washington Professional Basketball Corporation v. National Basketball Ass n,
D.C.S.D.N.Y., 131 F.Siipp. 50fi.
3 Strachman v. Palmer, 1 Cir., 177 F.2d 427.
32
that respondents schedule football games in various cities, including New
York, Chicago, Philadelphia and Los Angeles ; that a part of the business from
which they derive a significant portion of their gross receipts is the transmis-
sion of the games over radio and television into nearly every State of the
Union; that a part of the conspiracy was to destroy a competitive league by
boycotting it and its players ; that each team uses a standard player contract
which prohibits a player from signing with another club without the consent of
the club holding his contract; that these contracts are enforced by agreement
of the clubs to black-list any player violating them and to visit severe
penalties on recalcitrant member clubs; that, by black-listing petitioner, they
prevented him from becoming a player-coach in an affiliated league and effec-
tively prevented his employment in organized professional football in the
United States; and that this damaged him in the sum of .$35,000. Held:
1. The rule established in Federal Baseball Club v. National League, 259
U.S. 200, and Toolson v. New York Yankees, 346 U.S. 356, is specifically limited
to the business of organized professional baseball and does not control this
case. Pp. 449-452.
(a) As long as Congress continues to acquiesce, this Court should adhere to
— but not extend — the interpretation of the Act made in those cases. P. 451.
(b) If there be error or discrimination in these rulings, the orderly way to
eliminate it is by legislation and not by court decision. P. 452.
2. The volume of interstate business involved in organized professional foot-
ball places it within the provisions of the Antitrust Acts. P. 452.
3 Thp complaint states a cause of action, and petitioner is entitled to an
opportunity to prove his charges. Pp. 446-449, 453-454. 231 F. 2d 620, reversed.
Maxwell Keith argued the cause for petitioner. With him on the brief were
Joseph L. Alioto and Elwood S. Kendrick.
Philip Elman argued the cause for the United States, as amicus curiae, urg-
ing reversal. With him on the brief were Solicitor General Rankin, Assistant
Attorney General Hansen and Charles H. Weston.
Mar.shall E. Leahy and Bernard I. Nordlinger argued the cause for respond-
ents. John F. O'Dea was with them on a brief for the National Football
League et al., respondents.
Leo R. Friedman filed a brief for Klawans et al., respondents.
Mr. Justice Clark delivered the opinion of the Court.
This action for treble damages and injunctive relief, brought under § 4 of
the Clayton Act.i tests the application of the antitrust laws to the business of
professional football. Petitioner Radovich, an all-pro guard formerly with the
Detroit Lions, contends that the respondents^ entered into a conspiracy to
monopolize and control organized professional football in the United States, in
violation of § § 1 and 2 of the Sherman Act ;3 that part of the conspiracy was
to destroy the All-America Conference, a competitive professional football
league in which Radovich once played; and that pursuant to agreement,
respondents boycotted Radovich and prevented liim from becoming a player-
coach in the Pacific Coast League. Petitioner alleges that resp(>ndents' illegal
conduct damaged him in the sum of $35,000, to be trebled as provided by the
1 38 Stat. 7.31. 15 U.S.C. § 15. reads as follows :
"Sec 4 Tha*- any person who shall be injured in his business or property by reason
of anythinsr forbidden in the antitrust laws may sue therefor in any district court of
the United States in the district in which the defendant resides or is found or has
an agent, without respect to the amount in controversy, and shall recover threefold
the damages by him sustained, and the cost of suit, including a reasonable attorney s
fee."
Iniunctive relief is provided for by 38 Stat. 7.37, 15 U.S.C. § 26.
2 The respondents include the National Football League; its 10 member clubs at the
time the complaint was filed : Boston Tanks, New York Giants, Philadelphia Eagles,
Los Angeles Rams, Pittsburgh Steelers, Washington Redskins, Chicago tears Chicago
Cardinals. Detroit Lions, and Green Bay Packers ; the now defunct Pacific Coast
League- the San Francisco Clippers, a member of the Pacific Coast Lea.gue: Bert Bea.
Commissioner of the National Football League; and J. Rufus Klawans, Commissioner
of the Pacific Coast League.
3 26 Stat. 209, 15 U.S.C. § 1. reads in pertinent part: ^ ^ ^ „v •
"Sec 1 Every contract, combination in the form of trust or otherwise, or con-
spiracy, in restraint of trade or commerce among the several States ... is hereby
declared to be illegal. . . ."
26 Stat. 209. 15 U.S.C. § 2. reads in pertinent part :
"Sec 2 Every person who shall monopolize, or attempt to monopolize, or coniuine
or conspire with anv other person or persons, to monopolize any part of the trade
or commerce among the several States . . . shall be deemed guilty of a misdemeanor. . . .
33
Act. The trial court, on respondents' motion, dismissed tlie cause for lack of
jurisdiction and failure to state a claim on which relief could be granted. The
Court of Appeals affirmed, 231 F. 2d 620, on the basis of Federal Baseball Club
V. National League, 259 U.S. 200 (1922), and Toolson v. New York Yankees,
Inc., 346 U.S. 356 (1953), applying the baseball rule to all "team sports." It
further found that even if such application was erroneous and that United
States V. International Boxing Club, 348 U.S. 236 (1955), applied, Radovich
had not grounded his claim on conduct of respondents which was "calculated
to prejudice the public or unreasonably restrain interstate commerce." 231 F.
2d, at G23. We granted certiorari, 352 U.S. 818, in order to clarify the applica-
tion of the Toolson doctrine and determine whether the busine.'^s of football
comes within the scope of the Sherman Act. For the reasons hereafter stated
we conclude that Toolson and Federal Baseball do not control : that the
respondents' activities as alleged are within the coverage of the antitrust laws ;
and that the complaint states a cause of action thereunder.
Since the complaint was dismissed its allegations must be taken by us as
true. It is, therefore, important for us to consider what Radovich alleged.
Concisely the complaint states that :
1. Radovich began his professional football career in 1938 when he signed
with the Detroit Lions, a National League club. After four seasons of play he
entered the Navy, returning to the Lions for the 1945 season. In 1946 he a.sked
for a transfer to a National League club in Los Angeles because of the illness of
his father. The Lions refused the transfer and Radovich broke his player con-
tract by signing with and playing the 1946 and 1947 seasons for the Los
Angeles Dons, a member of the All-America Conference.* In 1948 the San
Francisco Clippers, a member of the Pacific Coast Leagiie which was affiliated
with but not a competitor of the National League, offered to employ Radovich
as a player-coach. However, the National League advised that Radovich was
black-listed and any affiliated club signing him would suffer severe penalties.
The Clippers tlien refused to sign him in any position. This lilack-listing
effectively prevented his employment in organized professional football in the
United States.
2. The black-listing was the result of a conspiracy among the respondents to
monopolize commerce in professional football among the States. The purpose of
the conspiracy was to "control, regulate and dictate the terms upon which
organized professional football shall be played throughout the United States"
in violation of § § 1 and 2 of the Sherman Act. It was part of the conspiracy to
boycott the All-America Conference and its players with a view to its destruc-
tion and thus strengthen the monopolistic position of the National Football
League.
3. As part of its football business, the respondent league and its member
teams schedule football games in various metropolitan centers, including New
York, Chicago, Philadelphia, and Los Angeles. Each team uses a standard
player contract which prohibits a player from signing with another club with-
out the consent of the club holding the player's contract. These contracts are
enforced by agreement of the clubs to black-list any player violating them and
to visit severe penalties on recalcitrant member clubs. As a further "part of
the business of professional football itself" and "directly tied in and connected"
with its football exhibitions is the transmission of the games over radio and
television into nearly every State of the Union. This is accomplished by con-
tracts which produce a "significant portion of the gross receipts" and without
which "the business of operating a professional football chil) would not be
profitable." The playing of the exhibitions themselves "is essential to the inter-
state transmission by broadcasting and television" and the actions of the
respondents against Radovich were necessarily related to these interstate
activities.
In the light of these allegations respondents raise two Issues : They say the
business of organized professional football was not intended by Consress to be
included within the scope of the antitrust laws ; and, if wrong in this conten-
tion, that the complaint does not state a cause of action upon which relief can
be granted.
4 This Conference operated from 1946 through 1949 at which time it was disbanded.
34
11.
Respondents' contention, boiled down, is that agreements similar to those
complained of here, which have for many years been used in organized base-
ball, have been held by this Court to be outside the scope of the antitrust laws.^
They point to Federal Baseball and Toolson, supra, both involving the busi-
ness of professional baseball, asserting that professional football has embraced
the same techniques which existed in baseball at the time of the former deci-
sion.6 They contend that stare decisis compels the same result here. True, the
umbrella under which respondents hope to stand is not so large as that con-
tended for in United States v. International Boxing Club, supra, nor in United
States V. Shiibert, 348 U.S. 222 (1955). There we were asked to extend Federal
Baseball to boxing and the theater. Here respondents say that the contracts
and sanctions which baseball and football find it necessary to impose have no
counterpart in other businesses and that, therefore, they alone are outside the
ambit of the Sherman Act. In Toolson we continued to hold the umbrella over
baseball that was placed there some 31 years earlier by Federal Baseball. The
Court did this because it was concluded that more harm would be done in
overruling Federal Baseball than in upholding a ruling which at best was of
dubious validity. Vast efforts had gone into the development and organization
of baseball since that decision and enormous capital had been invested in
reliance on its permanence. Congress had chosen to make no change.'' All this,
combined with the flood of litigation that would follow its repudiation, the
harassment that would ensue, and the retroactive effect of such a decision, led
the Court to the practical result that it should sustain the unequivocal line of
authority reaching over many years.
The Court was careful to restrict Toolson's coverage to baseball, following
the judgment of Federal Baseball only so far as it "determines that Congress
had no intention of including the business of baseball within the scope of the
federal antitrust laws." 346 U.S., at 3.57. The Court reiterated this in United
States V. Shubert, supra, at 230, where it said, "In short, Toolson was a narrow
application of the rule of stare decisis." And again, in International Boxing
Club, it added, ''Toolson neither overruled Federal Baseball nor necessarily
reafiirmed all that was said in Federal Baseball. . . . Toolson is not authority
for exempting other businesses merely because of the circumstance that they
are also based on the performance of local exhibitions." 348 U.S., at 242.
Furthermore, in discussing the impact of the Federal Baseball decision, the
Court made the observation that that decision "could not be relied upon as a
basis of exemption for other segments of the entertainment business, athletic
or otherwise. . . . The controlling consideration in Federal Baseball . . . was . . .
the degree of interstate activity involved in the particular business under
review." Id., at 242-243. It seems that this language would have made it clear
that the Court intended to isolate these cases by limiting them to baseball, but
since Toolson and Federal Baseball are still cited as controlling authority in
antitrust actions involving other fields of business, we now specifically limit
the rule there established to the facts there involved, i.e., the business of
organized professional baseball. As long as the Congress continues to acquiesce
we should adhere to— but not extend — the interpretation of the Act made in
those cases. We did not extend them to boxing or the theater because we
believed that the volume of interstate business in each — the rationale of
Federal Baseball — was such that both activities were within the Act. Likewise,
the volume of interstate business involved in organized professional football
places it within the provisions of the Act.
If this ruling is unrealistic, inconsistent, or illogical, it is sufficient to
answer, aside from the distinctions between the businessess,^ that were we con-
sidering the question of baseball for the first time upon a clean slate we would
5 No contention is made that the business of professional football has any specific
exemption from the antitrust laws.
6 Since this action was dismissed on the pleadings, there has been no factual deter-
mination establishing the claimed similarity between the business of baseball and
football.
7 Congress did consider the extension of the baseball rule to other sports. In 1951
four separate bills v.'ere introduced to exempt organized professional sports from the
antitrust laws. None of them were enacted. See H. R. 4229, 4230, 4231, and S. 1526,
S2d Cong.. 1st Sess. (1951).
8 Consideration of basic differences, if any, between the baseball and football
businesses, such as the football draft system, use of league affiliations, training facilities
and techniques, etc., is not necessary to this decision.
35
have no doubts. But Federal Basehall held the business of baseball outside the
scope of the Act. No other business claiming the coverage of those cases has
such an adjudication. "We, therefore, conclude that the orderly way to eliminate
error or discrimination, if any there be, is by legislation and not by court
decision. Congressional processes are more accommodative, affording the whole
industry hearings and an opportunity to assist in the formulation of new legis-
lation. The resulting product is therefore more likely to protect the industry
and the public alike. The whole scope of congressional action would be known
long in advance and effective dates for the legislation could be set in the future
without the injustices of retroactivity and surprise which might follow court
action. Of course, the doctrine of Toolson and Federal Baseball must yield to
any congressional action and continues only at its sufferance. This is not a
new approach. See Davis v. Department of Labor, 317 U.S. 249, 255 (1942) ;^
Compare Rutkin v. United States, 343 U.S. 130 (1952).
Ill
We now turn to the sufficiency of the complaint. At the outset the allega-
tions of the nature and extent of interstate commerce seem to be sufficient. In
addition to the standard allegations, a specific claim is made that radio and
television transmission is a significant, integral part of the respondents' busi-
ness, even to the extent of being the difference between a profit and a loss.
Unlike International Boxing, the complaint alleges no definite percentage in
this regard. However, the amount must be substantial and can easily be brought
out in "the proof. If substantial, as alleged, it alone is sufficient to meet the
commerce requirements of the Act. See International Boxing, supra, at 241.
Likewise, we find the technical objections to the pleading without merit.
The test as to sufficiency laid down by Mr. Justice Holmes in Hart v. B. F.
Keith Vaudeville Exchange, 262 U.S. 271, 274 (1923). is whether "the claim is
wholly frivolous." While the complaint might have been more precise in its
allegations concerning the purpose and effect of the conspiracy, "we are not
prepared to say that nothing can be extracted from this bill that falls under
the act of Congress . . ." Id., at 274. See also United States v. Employing
Plasterers Assn., 347 U.S. 186 (1954).
Petitioner's claim need only be "tested under the Sherman Act's general
prohibition on unreasonable restraints of trade," Times-Picayune Publishing
Co. V. United States, 345 U.S. 594. 614 (1953), and meet the requirement that
petitioner has thereby suffered injury. Congress has, by legislative fiat, deter-
mined that such prohibited activities are injurious to the public ^° and has
provided sanctions allowing private enforcement of the antitrust laws by an
aggrieved party. These laws protect the victims of the forbidden practices as
well as the public. Mandeville Island Farms, Inc. v. American Crystal Sugar
Co., 334 U.S. 219, 236 (1948). Furthermore, Congress itself has placed the
private antitrust litigant in a most favorable position through the enactment
of § 5 of the Clayton Act." Emich Motors Corp. v. General Motors Corp., 340
U.S. 558 (1951). in the face of such a policy this Court should not add require-
ments to burden the private litigant beyond what is specifically set forth by
Congress in those laws.
Respondents' remaining contentions we believe to be lacking in. merit.
We think that Radovich is entitled to an opportunity to prove his charges.
Of course, we express no opinion as to whether or not respondents have, in
fact, violated the antitrust laws, leaving that determination to the trial court
after all the facts are in.
Reversed.
9 The conciirrine opinion nsps this lanjrunsre: "Such a desirnble end cannot now be
achieved merely bv judicial repudiation of the Jensen doctrine." .S17 U.S.. at 2.53.
10 In Apex Hof^ierii Co. v. Leader. 310 U.S. 469 (1940), this Court said: "The end
sought was the prevention of restraints to free competition in business and commercial
transactions which tended to restrict production, raise prices or otherwise control the
market to the detriment of purchasers or consumers of goods and services, all of which
had come to be regarded as a special form of public injury." (Empahsis supplied.)
Id., at 49.S. In Standard Sianitary Mfo. Co. v. United States. 22R U.S. 20 (1912). speak-
ing of the antitrust laws, the Court said : "The law is its own measure of right and
wrong of what it permits, or forbids. ,nnd the judgment of the courts cannot be set
up against it in a supposed accommodation of its policy with the good intention of
parties, and it may be. of some good results." (Emphasis supplied.) Id., at 49.
11 .38 Stat. 731, 15 U.S.C. § 16. declares that a final judgment against a defendant
in proceedings bv the Government for violation of the antitrust laws may be introduced
by a private litigant in a subsequent treble damage action and establishes prima facie
a violation of the antitrust laws.
3e
Mr. Justice Frankfurter, dissenting.
The difficult problem in this case derives for me not out of the Sherman Law
but m relation to the appropriate compulsion of stare decisis. It does not derive
trom the bherman Law because the most conscientious probing of the text
and the interstices of the Sherman Law fails to disclose that Conj>ress whose
will we are enforcing, excluded baseball— the conditions under which that sport
IS carried on— from the scope of the Sherman Law but included football I say
this, tuUy aware that the Sherman Law's applicability turns on the particular
m-cumstances of activities pursued in trade and commerce among the several
Mates. But whether the conduct of an enterprise is within or without the
limits of the Sherman Law is, after all, a question for judicial determination
and conscious as I am of my limited competence in matters athletic I have yet
to hear of any consideration that led this Court to hold that "the 'business of
providing public baseball games for profit between clubs of professional baseball
piayers was not within the scope of the federal antitrust laws," TooUon v
New York Yankees, 346 U.S. 356, 357. that is not equally applicable to football ^
But considerations pertaining to stare decisis do raise a serious question for
me._ That principle is a vital ingredient of law, for it "embodies an important
social policy." Helverinfi v. HalJock, 309 U.S. 106, 119. It would disregard the
principle for a judge stubbornly to persist in his views on a particular issue
atter the contrary had become part of the tissue of the law. Until then full
respect for stare decisis does not require a judge to forego his own convictions
promptly after his brethren have rejected them.
The considerations that governed me two years ago in United States v
International Bowing Glut), 348 U.S. 236, have not lost their force by reason of
the authority that time gives to a single decision. And so I am confronted with
the TooUon case, supra, which guides me to find the present situation within
Its scope, and the Boxing case, supra, which, while it looks the other way left
Toolson as a living authority. Respect for the doctrine of stare decisis doe's nor
yet require me to disrespect the views I expressed in the Boxing case
I would affirm.
Mr. Justice Harlan, with whom Mr. Justice Brennan joins, dissenting
What was foreshadowed by United States v. Inteniationnl Boxing Clfh 348
U.S. 236, has now come to pass. The Court, in holding that professional foot-
ball IS subject to the antitrust laws, now says in effect that professional base-
ball IS sui generis so far as those laws are concerned, and that therefore
Federal Basehall Clul) v. National League, 259 U.S. 200. and TooUon v New
York Yankees, Inc., 346 U.S. 356, do not control football by reason of stare
decisis. Since I am unable to distinguish football from baseball under the
rationale of Federal Baseball and Toolson, and can find no basis for attributing
to Congress a purpose to put baseball in a class bv itself, I would adhere to the
rule of stare decisis and affirm the judgment below.
If the situation resulting from tlie baseball decisions is to be changed I
think it far better to leave it to be dealt with by Congress than for this Court
to becloud the situation further, either by making untenable distinctions
between baseball and other professional sports, or by discriminatory fiat in
favor of baseball.
TooLsoN V. New York Yankees, Inc. et al.
No. 18. CERTIOEARI TO THE UNITED STATES COURT OF APPEALS FOR THE
NINTH CIRCUIT
Argued October 13, 1953.— Decided November 9, 1953
The judgments in these cases are affirmed on the authoritv of Federal Base-
hall Club of Baltimore v. National League of Professional Baseball Clubs, 259
U.S. 200, so far as that decision determines that Congress had no intention of
including the business of baseball within the scope of the federal antitrust
laws. Pp. 356-357. 200 F. 2d 198, 202 F. 2d 413. 428, affirmed.
Howard C. Parke argued the cause for petitioner in No. 18. With him on the
brief was Gene M. Harris.
1 Toj^ether with No. 2S. KowalsJci v. Chandler, Commififiioner of Bane'hfiU et al
argued October 1.3-14, 1953. aud No. 25. Corbett et al. v. Chandler. Commissioner of
Baseball e/ al. arsupd Octnbpr 14, 1953, both on certiorari to the United States Court
of Appeals for the Sixth Circuit.
37
Frederic A. Johnson argued the cause for petitioner in Xo. 23 and Seymour
Martinson argued the cause for petitioners in No. 25. With them on the briefs
were Maurice H. Koodish and Edward Martinson.
Norman S. Sterry argued tlie cause and filed a brief for respondents in No.
18.
Raymond T. Jackson argued the cause for respondents in Nos. 23 and 25.
With him on tlie briefs were Benjamin F. Fiery and Louis F. Carroll.
Thomas Reed Powell filed a brief for the Boston American League Base Ball
Company in No. 18, as amicus curiae, urging afiirmance.
Per Curiam.
In Federal Baseiall ClnJ) of Baltimore v. National League of Professional
Baseball Clubs, 259 U.S. 200 (1922), this Court held that the business of provid-
ing public baseball games for profit between clubs of professional baseball
players was not within the scope of the federal antitrust laws. Congress has
had the ruling under consideration but has not seen fit to bring such business
under these laws by legislation having prospective effect. The business has thus
been left for thirty years to develop, on the understanding that it was not
subject to existing antitrust legislation. The present cases ask us to overrule
the prior decision and, with retrospective effect, hold the legislation applicable.
We think that if there are evils in this field which now warrant application to
it of the antitrust laws it should be by legislation. Without re-examination of
the underlying issues, the judgments below are affirmed on the authority of
Federal Baseball Club of Baltimore v. National League of Professional Basehall
Clubs, supra, so far as that decision determines that Congress had no intention
of including the business of baseball within the scope of the federal antitrust
laws.
Affirmed.
Mr. Justice Burton, with whom Mi*. Justice Reed concurs, dissenting.
Whatever may have been the situation when the Federal Baseball Club
case ^ was decide in 1922, I am not able to join today's decision which, in
effect, announces that organized baseball, in 1953, still is not engaged in inter-
state trade or commerce. In the light of organized baseball's well-known and
widely distributed capital investments used in conducting competitions between
teams constantly traveling between states, its receipts and expenditures of
large sums transmitted between states, its numerous purchases of materials in
interstate commerce, the attendance at its local exhibitions of large audiences
'Often traveling across state lines, its radio and television activities which
expand its audiences beyond state lines, its sponsorship of interstate advertis-
ing, and its highly organized "farm system" of minor league baseball clubs,
coupled with restrictive contracts and understandings between individuals
and among clubs or leagues playing for profit throughout the United States,
and even in Canada, Mexico and Cuba, it is a contradiction in terms to say that
the defendants in the cases before us are not now engaged in interstate trade
or commerce as those terms are used in the Constitution of the United States
and in the Sherman Act.^
In 1952 the Subcommittee on Study of Monopoly Power, of the House of
Representatives Committee on the Judiciary, after extended hearings, issued
a report dealing with organized baseball in relation to the Sherman Act. In
that report it said :
" 'Organized baseball' is a combination of approximately 380 separate base-
ball clubs, f>perating in 42 different States, the District of Columbia, Canada,
Cuba, and Mexico. . . .
"Inherently, professional baseball is intercity, intersectional, and interstate.
At the beginning of the 1951 season, the clubs within organized baseball were
divided among 52 different leagues. Each league is an unincorporated associa-
tion of from 6 to 10 clubs which play championship baseball games among
themselves according to a prearranged schedule. Such a league organization
is essential for the successfvil operation of baseball as a business.
2 Federal Baseball Clul) v. National League. 259 U.S. 200.
3 Comp.ire Paul v. Virginia. 8 Wall. 168, and Hooper v. California. 155 U.S. 648, with
United States v. South-Eastern Undertcr iters Assn., 322 U.S. 5.33, and Lorain Journal
Co. V. United States. 342 U.S. 143. See also, Times-Picayune Puhlishing Co. v. United
States. .345 U.S. 594 ; United States v. National Assn. of Real Estate Boards, 3.39 U.S.
485 ; United States v. Crescent Amusement Co., 323 U.S. 173 ; American Medical Assn.
•V. United States, 317 U.S. 519.
"Of the 52 leagues associated within organized baseball in 1951, 39 were
interstate in nature." ^
In the Federal Baseball Club case the Court did not state that even if the
activities of organized baseball amounted to interstate trade or commerce
those activities were exempt from the Sherman Act. The Court acted on its
determination that the activities before it did not amount to interstate com-
merce. The Court of Appeals for the District of Columbia, in that case, in 1920,
described a major league baseball game as "local in its beginning and in its
end." ^ This Court stated that "The business is giving exhibitions of base ball,
which are purely state affairs," and the transportation of players and equip-
ment between states "is a mere incident. . . ." s Ti^e main thrust of the argu-
Court, was in support of that proposition." Although counsel did argue that
ment of counsel for organized ba.seball, both in the Court of Appeals and in this
the activities of organized baseball, even if amounting to interstate commerce,
did not violate the Sherman Act.s the Court significantly refrained from
expressing its opinion on that issue.
That the Court realized that the then incidental interstate features of
organized baseball might rise to a magnitvide that would compel recognition of
them independently is indicated by the statement made in 1923 by Mr. Justice
Holmes, the writer of the Court's opinion in the Federal Baseball Club case.
In 1923, in con.sidering a bill in equity alleging a violation of the Sherman
Act by parties presenting local exhibitions on an interstate vaudeville circuit,
the Court held that the bill should be considered on its merits and, in writing
for the Court, Mr. Justice Holmes said "The bill was brought before the deci-
sion of the Base Ball Club case, and it may be that what in general is inci-
dental, in some instances may rise to a magnitude that requires it to be
considered independently." ^
The 1952 report of the Congressional Subcommittee previously mentioned
also said :
"Under judicial interpretations of this constitutional provision [the com-
merce clause], the Congress has power to investigate, and pass legislation
6, 559. 1
6,766.6
18, 334. ?
2,221.4
2, 320. 2
4,517.8
422. 6
515.7
911.5
884.5
3, 365. 5
582. 8
850.8
2, 936. 3
733. 4
776.0
1,969.6
4 H. R. Rep. No. 2002. S2d Conff., 2d Spsp. 4, 5.
"The primary sources of revenue for baseball clubs are admissions, radio and tele-
vision, and concessions. The following table indicates the combined revenue of the
16 major-league clubs from these sources for the years 1929, 1939, and 1950.
"MAJOR LEAGUE REVENUE
"[In thousands of dollars]
"Source of revenue 1929 1 1939 1950
Horre games
Road games.
Exhibition games
Radio and television
Concessions (net)
Other
Gross receipts 10,519.5 12,113.3 32,035.5
" > Data unavailable for 2 clubs: Chicago, American League; and Pittsburgh, National League.
"The fastest-.crowing source of revenue for major league clubs is radio and television.
Receipts from these media of interstate commerce were nonexistent in 1929. In 1939,
7.3 percent of the clubs' revenue came from this source ; and in 19.50, this share rose
to 10.5 percent.
"Portraved in absolute terms, the growing importance of radio and television becomes
even more pronounced. Receipts rose from nothing in 1929 to $884,500 in 1939 and
$3,365,500 in 1950. Reported income from primary radio and television contracts for
1951 indicate that this sharp increase is continuing. ... To this must be added
$110,000 for the sale of radio and television rights to the 1951 all-star game and
$1,075,000 for the sale of similar rights to the 1951 world series." Id., at 5-6.
5 Nntiofial Leaque v. Federal Baseball Clul, 50 App. D.C. 165, 169, 269 F. 681. 685.
6 259 U.S., at 208, 209.
7 See brief for appellants in the Court of Appeals, pp. 45-67 ; brief for defendants
In error in this Court, pp. 45-66.
8 See brief for appellants in Court of Appeals, pp. 68-72 ; brief for defendants in
error in this Court, pp. 66-72.
9 Hart v. Keith Vaudeville Exchange, 262 U.S. 271, 274, and see North American
Co. V. 8.E.C., 327 U.S. 686, 694.
39
dealing with professional baseball, or more particularly 'organized baseball,' If
that business is, or affects, interstate commerce.
"After full review of all the foregoing facts and with due consideration of
modern judicial interpretation of the scope of the commerce clause, it is the
studied judgment of the Sul)committee on the Study of Monopoly Power that
the Congress has jurisdiction to investigate and legislate on the subject of
professional baseball." H.R. Rep. No. 2002, 82d Cong., 2d Sess. 4, 7, and see
111-139.10
In cases Nos. 18 and 23 the plaintiffs here allege that they are professional
baseball players who have been damaged by enforcement of the standard
"reserve clause" in their contracts pursuant to nationwide agreements among
the defendants.il In effect they charge that in violation of the Sherman Act,
10 In opposing approval of four exclusionary bills thpn pendinsr. the Subcommittee
did not take the stand that organized baseball and other comparable sports, although
constituting interstate trade or commerce, already are exempt from the broad coverage
of the Sherman Act. On the contrary, it said :
"Four bills have been introduced in the Congress, three in the House, one in the
Senate, intending to give baseball and all other professional sports a complete and un-
limited immunity from the antitrust laws. The requested exemption would extend to
all professional sports enterprises and to all acts in the conduct of such enterprises.
The law would no longer require competition in any facet of business activity of any
sport enterprise. Thus the sale of radio and television rights, the management of stadia,
the purchase and sale of advertising, the concession industry, and many other business
activities, as well as the aspects of baseball which are solely related to the promotioii
of competition on the playing field, would be immune and untouchable. Such a broad
exemption could not be granted without substantially repealing the antitrust laws."
Id., at 230.
11 "The reserve clause is popularly believed to be some provision in the player con-
tract which gives to the club in organized baseball which first signs a player a con-
tinuing and exclusive right to his services. Commissioner Frick testified that this
popular understanding was essentially correct. He pointed out, however, that the
reserve clause is not merely a provision in the contract, but also incorporates a
reticulated system of rules and regulations which enable, indeed require, the entire
baseball organization to respect and enforce each club's exclusive and continuous right
to the services of its plavers." H. R. Rep. No. 2002. 82d Cong., 2d Sess. 111. See also.
Section VII, The Reserve Clause, id., at 111-1.39, and Gardella v. Chandler, 172
F. 2d 402.
In No. 18 the following specific allegations appear and those in No. 23 are com-
parable :
"XI.
"That the Defendants, and each of them, have entered into or agreed to be bound
by a contract in the restraint of Interstate Commerce ; that said contract is designated
as the Major-Minor League Agreement, dated December 6, 1946, and provides in effect
that:
"1. All players' contracts in the Major Leagues shall be of one form and that all
players' contracts in the Minor Leagues shall be of one form.
"2. That all players' contracts in any league must provide that the Club or any
assignee thereof shall have the option to renew the players' contract each year and
that the player shall not play for any other club but the club with which he has a
contract or the assignee thereof.
"3. That each club shall, on or before a certain date each year, designate a reserve
list of active and eligible players which it desires to reserve for the ensuing year. That
no player on such a reserve list may thereafter be eligible to play for any other club
until his contract has been assigned or until he has been released.
"4. That the player shall be bound by any assignment of his contract by the club,
and that his remuneration shall be the same as that usually paid by the assignee
club to other players of like ability.
"5. That there shall be no negotiations between a player and any other club from
the one which he is under contract or reservation respecting employment either present
or prospective unless the Club with which the player is connected shall have in writing
expressly authorized such negotiations prior to their commencement.
"6. That in the case of Major League players, the Commissioner of Baseball and in
the case of Minor League players, the President of the National Association, may
determine that the best interests of the game require a player to be declared ineligible
and. after such declaration, no club shall be permitted to employ him unless he shall
have been reinstated from the ineligible list.
"7. That an ineligible player whose name is omitted from a reserve list shall not
thereby be rendered eligible for service unless and until he has applied for and been
granted reinstatement.
"8. That any player who violates his contract or reservation, or who participates In
a game with or against a club containing or controlled by ineligible players or a player
under indictment for conduct detrimental to the good repute of professional baseball,
shall be considered an ineligible player and placed on the ineligible list.
"9. That an ineligible player must be reinstated before he may be released from his
contract.
"10. That clubs shall not tender contracts to ineligible players until they are
reinstated.
(Footnote continued on p. 40.)
40
organized baseball, through its illegal monopoly and unreasonable restraints
of trade, exploits the players who attract the profits for the benefit of the clubs
and leagues. Similarly, in No. 25, the plaintiffs allege that 5tecause of illegal
and inequitable agreements of interstate scope between organized basebaii and
the Mexican League l)inding each to respect the other's "reserve clauses"
thev have lost the services of and contract rights to certain l)aseball players.
The plaintiffs also allege that the defendants have entered into a combination,
conspiracy and monopoly or an attempt to monopolize professional baseball in
the United Stares to the substantial damage of the plaintiffs.
Conceding the major asset which baseball is to our Nation, the high place
it enjoys in the hearts of our people and the possible justification of special
treatment for organized sports which are engaged in interstate trade or com-
merce, the authorization of such treatment is a matter within the discretion of
Congress.!- Congress, however, has enacted no express exemption of organized
baseball from the Sherman Act, and no court has demonstrated the existence
of an implied exemption from that Act of any sport that is so highly organized
as to amount to an interstate monopoly or which restraints interstate trade or
commerce. In the absence of such an exemption, the present popularity of
organized baseball increases, rather than diminishes, the importance of its
eompliance with standards of reasonableness comparable with those now
required bv law of interstate trade or commerce. It is interstate trade or
commerce 'and. as such, it is subject to the Sherman Act until exempted.
Accordingly, I would reverse the judgments in the instant cases and remand
the causes "to the respective District Courts for a consideration of the merits of
the alleged violations of the Sherman Act.
United States v. International Boxing Club of New York,
Inc. et. al.
appeal from the united states district court for the
southern DISTRICT OF NEW YORK
No. 53. Argued November 10, 1954.— Decided January 31, 1955
In a civil antitrust action brought by the Government to restrain alleged
violations of §§ 1 and 2 of the Sherman Act. the complaint alleged, inter alia,
that the defendants are engaged in the business of promoting professional
championship boxing contests on a multistate basis and selling rights to tele-
vise, broadcast and film such contests for interstate transmission; that their
receipts from the sale of television, radio and motion picture rights represent
over 25% of their total revenue and in some instances exceed the revenue
from the sale of admission tickets: and that the defendants have restrained
and monopolized trade and commerce through a conspiracy to exclude competi-
tion in their line of business. Held: The complaint states a cause of action,
and the Government is entitled to an opportunity to prove its allegations.
Pp. 237-245.
(a) As described in the complaint, defendants' business of promoting pro-
fessional championship boxing contests on a multistate basis and selling rights
"11. That no club may release unconditionally an ineligible player unless such player
Is first reinstated from the ineligible list to the active list.
"XIII.
"That bv reason of Plaintiff being placed and held on said ineligible list .as herein-
above set "out and the making of the aforementioned contract by the Defendants, the
Defendant[s]. and each of them, have refused since the 2,5th day of May^ ID.oO and
still do refuse to allow Plaintiff to play professional baseball, and that Plaintiff has
thereby been deprived of his means of livelihood, all to the Plaintiff's damages m the
sum of $12,5,000.00." . „ . ^, ^ .^, ^ , ., ^.
The complaint also contains a separate cause of action alleging that the detendants,
bv virtue of their agreements, have entered into a combination and conspiracy m the
re'^traint of trade or commerce among the several states, and another cause of action
alleging that the defendants have, by their agreements, combined to monopolize profes-
sional baseball in the United States. . ci,„^„,„„
12 E.g.. Congress has expressly exempted cejtain specific^ activities from the bherman
§ 1013 (insurance). And see Apex Hosiery Co. v. Leader, 310 U.S. 469, 501, 512
41
to televise, broadcast and film such contests for interstate transmission consti-
tutes "trade or commerce among the several States" within the meaning of the
Sherman Act. Pp. 240-243.
(b) That a boxing match is "a local affair" does not alone bar application
of the Sherman Act to a business based on the promotion of such matches, if
the business is itself engaged in interstate commerce or if the business imposes
illegal restraints on interstate commerce. P. 241.
<c) Federal BasehaU Chib v. National League, 259 U.S. 200, and Toolson v.
Netv York Yankees, 346 U.S. 356, did not immunize from application of the
Sherman Act ail businesses based on professional sports. Pp. 241-243.
(d) Whether such a broad exemption should be granted is an issue to be
resolved by Congress, not this Court. Pp. 243-245.
Reversed.
Philip Elmau argued the cause for the United States. With him on the
brief were Solicitor General Sobeloft', Assistant Attorney General Barnes and
Daniel M. Friedman.
Manuel Lee Robbins, Special Assistant Attorney General of New York,
argued the cause for the New York State Athletic Commission, as amicus
curiae, urging reversal. With him on the brief was Nathaniel L. Goldstein,
Attorney General, for the State of New York and the New York State Athletic
Commission, as amici curiae.
Whitney North Seymour and Charles H. Watson argued the cau.se for
appellees. On the brief were Mr. Seymour, Benjamin C. Milner and Armand F.
Macmanus for the International Boxing Club of New York, Inc. et al., and Mr.
Watson for the International Boxing Club, Inc. et al., appellees.
Mr. Chief Justice Warren delivered the opinion of the Court.
This is a civil antitrust action brought by the Government in the United
States District Court for the Southern District of New York. The defendants
— three corporations and two individuals — are engaged in the business of pro-
moting professional championship boxing contests.i The Government's com-
plaint charges that the defendants, in the course of this business, have violated
§§ 1 and 2 of the Sherman Act.^ After this Court's decision in Toolson v.
New York Yankees, 346 U.S. 356, the defendants moved to dismiss the com-
plaint. The District Court granted the motion in reliance upon the Toolson
decision and Federal Baseball Club of Baltimore v. National League of Profes-
sional Baseball Clubs, 259 U.S. 200.3 r^ij^ pagp^ together with United States v.
Shubert, ante, p. 222, is here on direct appeal under the Expediting Act, 15
U.S.C. § 29.
The Government's complaint alleges that promoters of professional champi-
onship boxing contests
"make a substantial utilization of the channels of interstate trade and
commerce to :
"(a) negotiate contracts with boxers, advertising agencies, seconds, referees,
judges, announcers, and other personnel living in states other than tliose in
which the promoters reside ;
"(b) arrange and maintain training quarters in states other than those in
which the promoters reside ;
1 The corporate defendants are International Boxing Club of New York. In^?.. Inter-
national Boxing Club, and Madison Square Garden Corporation. The individi'al de-
fendants are .Tames D. Norris and Arthur INI. Wirtz. The individual defendants, together
with Madison Square Garden Corporation, own 80% of the stock of International Boxing
Club of New York. Inc., and International Boxing Club. The nature of the business
involved is described in an appendix to this opinion.
2 15 U.S.C. §§ 1 and 2. These sections provide :
"§ 1. . . . Every contract, combination in the form of trust or otherwise, or couspirae.v.
in restraint of trade or commerce among the several States, or with foreign nations,
is declared to be illegal. . . . Every person who shall make any contract or engage in
any combination or conspiracy declared by sections 1-7 of this title to be illegal shall
be deemed guilty of a misdemeanor ....
"§ 2. . . . Every person who shall monopolize, or attempt to monopolize, or combine
or conspire with any other person or persons, to monopolize any part of the trade or
commerce among the several States, or with foreign nations, shall be deemed guilty
of a misdemeanor ...."'
Section 4 confers jurisdiction on the district courts "to prevent and restrain violations
of sections 1-7 of this title" in equity proceedings instituted under the direction of
the Attorney General.
3 The District Court's opinion was oral and not transcribed. All the parties agree,
however, that the dismissal was based on Federal BasehaU and Toolson.
42
"(c) lease suitable arenas, and arrange other details for boxing contests, par-
ticularly when the contests are held in states other than those in which the
promoters reside ;
"(d) sell tickets to contests across state lines;
"(e) negotiate for the sale of and sell rights to make and distribute motion
pictures of boxing contests to the 18,000 theatres in the United States ;
"(f) negotiate for the sale of and sell rights to broadcast and telecast box-
ing contests to homes through more than 3,000 radio stations and 100 television
stations in the United States ; and
"(g) negotiate for the sale of and sell rights to telecast boxing contests to
some 200 motion picture theatres in various states of the United States for
display by large-screen television."
The promoter's receipts from the sale of television, radio, and motion picture
rights to championship matches, according to the complaint, represent on the
average over 25% of the promoter's total revenue and in some instances exceed
the revenue derived from the sale of admission tickets.* The complaint alleges
that the defendants have restrained and monopolized this trade and com-
merce — "the promotion, exhibition, broadcasting, telecasting, and motion pic-
ture production and distribution of professional championship boxing contests
in the United States'" — through a conspiracy to exclude competition in their
line of business. The conspiracy, it is claimed, began in 1949 with an agreement
among the defendants and Joe Louis, then heavyweight champion of the world,
that Louis would resign his title, that he would procure exclusive rights to the
services of the four leading title contenders in a series of elimination contests
which would result in the recogiiition of a new heavyweight champion, that
he would also obtain exclusive rights to broadcast, televise, and film these con-
tests, and that he would assign all such exclusive rights to the defendants.
The defendants have allegedly sought to maintain and effectviate this con-
spiracy by the following means : by eliminating the "leading competing pro-
moter" of championship matches ; by acquiring the exclusive right to promote
professional boxing contests in all the "principal arenas" where championship
matches can be successfully presented ; and by requiring each title contender to
agree, as a condition of fighting for the championship, that if he wins he would,
for a period of three (and sometimes five) years, take part only in title con-
tests promoted by the defendants. As a consequence of these acts, the com-
plaint alleges, the defendants have promoted, or participated in the promo-
tion of, all but two of the 21 championship matches held in the United States
between June 1949 and the filing of the complaint in March 1952.
These allegations must of course be taken as true at this stage of the pro-
ceeding. And the defendants do not deny that the allegations state a cause of
action if their business is subject to the Sherman Act. The question thus pre-
sented is whether the defendants' business as described in the complaint — the
promotion of professional championship boxing contests on a multistate basis,
coupled with the sale of rights to televise, broadcast, and film the contests for
interstate transmission — constitutes "trade of commerce among the several
States" within the meaning of the Sherman Act.
The question is perhaps a novel one in that this Court has never before con-
sidered the antitrust status of the boxing business. Yet, if it were not for
Federal Baseball and Toolson. we think that it would be too clear for dis-
pute that the Government's allegations bring the defendants within the scope
of the Act. A boxing match — like the showing of a motion picture ( United
States V. Crescent Amusement Co., 323 U.S. 173, 183) or the performance of
a vaudeville act (Hart v. B. F. Keith Vaudeville Exchange, 262 U.S. 271) or
the performance of a legitimate stage attraction (United States v. Shuhert,
ante, p. 222) — "is of course a local affair." But that fact alone does not bar
application of the Sherman Act to a business based on the promotion of such
matches, if the business is itself engaged in interstate commerce or if the
business imposes illegal restraints on interstate commerce. Apart from Federal
Baseball and Toolson, it would be suflScient, we believe, to rest on the alle-
gation that over 25% of the revenue from championship boxing is derived
from interstate operations through the sale of radio, television, and motion
4 The complaint further alleges that "With the progressive and continuing expansion
of television facilities, the proportion of the promoter's total revenue derived from
television, radio and motion pictures, has been on an ascending curve . . . ."
43
picture rights.^ Compare United States v. Yelloiv Cab Co., 332 U.S. 218, 225-
226; Times-Picayune Co. v. United States, 345 U.S. 594, 602, n. 11; Mande-
viUe Island Farms v. American Crystal Sugar Co., 334 U.S. 219, 227-235;
United States v. Frankfort Distilleries, 324 U.S. 293, 297-298 ; United States v.
Women's Sportstvear Mfrs. Assn., 336 U.S. 460, 464 ; United States v. Employing
Plasterers Assn., 347 U.S. 186, 189; and cases collected in the Shul^ert opinion.
See also Currin v. Wallace, 306 U.S. 1, 10; Wickard v. Filburn, 317 U.S. Ill,
127-128.
Notwithstanding these decisions, the defendants contend that they are
exempt from the Sherman Act under the rule of stare decisis. They, like the
defendants in the Shubert case, base this contention on Federal Baseball and
Toolson. But they would be content with a more restrictive interpretation of
Federal Baseball and Toolson than the defendants in the Shubert case. The
Shubert defendants argv;e that Federal Baseball and Toolson immunized all
businesses built around the live presentation of local exhibitions. The defend-
ants in the instant case argue that Federal Baseball and Toolson immunized
only such businesses as involve exhibitions of an athletic nature. We cannot
accept either argument.
For the reasons stated in the Toolson opinion and restated in United States
V. Shubert, ante, p. 222, Toolson neither overruled Federal Baseball nor neces-
sarily reaffirmed all that was said in Federal Baseball. Instead, "[wjithout
re-examination of the underlying issues," the Court adhered to Federal Base-
ball "so far as that decision determines that Congress had no intention of
including the business of baseball within the scope of the federal antitrust
laws." 346 U.S., at 357. We have held today in the Shubert case that Toolson
is not authority for exempting other businesses merely because of the circum-
stance that they are also based on the performance of local exhibitions. That
ruling is fully applicable here.
Moreover, none of the factors underlying the Toolson decision are present in
the instant case. At the time the Government's complaint was filed, no court
had ever held that the boxing business was not subject to the antitrust laws.^
Indeed, this Court's decision in the Hart case, less than a year after the
Federal Baseball decision, clearly established that Federal Baseball could not
be relied upon as a basis of exemption for other segments of the entertainment
business, athletic or otherwise. Surely there is nothing in the Holmes opinion
in the Hart case to suggest, even remotely, that the Court was drawing a line
between athletic and nonathletic entertainment. Nor do we see the relevance of
such a distinction for the purpose of determining what constitutes "trade or
commerce among the several States." The controlling consideration in Federal
Baseball and Hart was, instead, a very practical one — the degree of interstate
activity involved in the particular business under review. It follows that stare
decisis cannot help the defendants here ; for, contrary to their argument,
Federal Baseball did not hold that all businesses based on professional sports
were outside the scope of the antitrust laws. The issue confronting us i.s, there-
fore, not whether a previously granted exemption should continue, but whether
an exemption should be granted in the first instance. And that issue is for
Congress to resolve, not this Court. See United States v. South-Eastern Under-
writers Assn., 322 U.S. 533, 561.
The issue was, in fact, before Congress only recently. In 1951, four identical
bills were introduced in Congress — three in the House and one in the Senate —
forbidding the application of the antitrust laws "to organized professional
sports enterprises or to acts in the conduct of such enterprises." ^ Extensive
hearings on the three House bills were conducted by the Subcommittee on
Study of Monopoly Power of the Committee on the Judiciary ; no hearings
5 All three media are concededly ensajred in interstate commerce. E.g., Federal Radio
Comm'n v. Nelson Bros. Co., 2R9 U.S. 266. 279 (radio) ; Dumont Laboratories v. Carroll,
184 F. 2d 15.3, 154 (C.A. 3d Cir.), cert, denied, .340 U.S. 929 (television) ; United
States V. Paramount Pictures, 3.34 U.S. 131 (motion pictures).
6 Shall V. Henry. 211 F. 2d 226 (C.A. 7tli Cir.). was decided subsequent to the de-
cision below. So also was Peller v. International Boxing Club, unreported. Civil 52 C
813, April 23, 19.^4 (D.C. N.D. 111.). The unreported decision (D.C. N.D. 111.) which
Shall V. Henry affirmed was decided prior to the decision below but after the filing of
the Government's complaint
7 H. R. 4229, 4230, 4231. and S. 1526, 82d Cong., 1st Sess. These bills were intro-
duced "by friends of baseball because they feared that the continued existence of
organized baseball as America's national pastime was in substantial danger by the
threat of impending litigation." H.R. Rep. No. 2002, 82d Cong., 2d Sess., p. 1.
44
were held on the Senate bill.s At the conclusion of its hearings, the House
Subcommittee unanimously declared its opposition to the four bills. Its report
states : ^
"The requested exemption would extend to all professional sports enterprises
and to all acts in the conduct of such enterprises. The law would no longer
require competition in any facet of business activity of any sport enterprise.
Thus the sale of radio and television rights, the management of stadia, the
purchase and sale of advertising, the concession industry, and many other
business activities, as Avell as the aspects of basebaJl which are solely related
to the promotion of competition on the playing field, would be immune and
untouchable. Svich a broad exemption could not be granted without substantially
repealing the antitrust laws." (Italics added.)
With respect to baseball, the Subcommittee recommended a postponement of
any legislation until the status of Federal Baseball was clarified in the
courts. 10 No further action was taken on any of the bills; Congress thus left
intact the then-existing coverage of the antitrust laws. Yet the defendants in
the instant case are now asking this Court for precisely the same exemption
which enactment of those Jiills would have afforded. Their remedy, if they are
entitled to one, lies in further resort to Congress, as we have already stated.
For we agree that "Such a broad exemption could not be granted without
substantially repealing the antitrust laws."
As in the Shiihert case, we are concerned here only with the sufficiency of
the Government's complaint. We hold that the complaint states a cause of
action and that the Government is entitled to an opportunity to prove its
allegations. The judgment of the court below is Reversed.
Mr. Justice Burton, retaining the views expressed in his dissent in the
Toolson ca.se, 346 U.S. 3.56, 357, joins the opinion and judgment of the Court in
this case. Mr. Justice Reed joins in this concurrence.
[For dissenting opinion of Mr. Justice Frankfurter, joined by Mr. Justice
Minton, see post, p. 248.]
[For dissenting opinion of Mr. Justice Minton, see post, p. 251.]
No. 70 Civ. 202
Curtis C. Flood, Plaintiff, v. Bowie K. Kuhn, Individually
AND AS Commissioner of Baseball, et al.,
Defendants.
united states district court, S. D. new YORK, AUG. 12, 1970.
Professional baseball player brought action seeking to have baseball's reserve
system declared unlawful. The District Court, Cooper, J., held, inter alia, that
under United States Supreme Court decision baseball remains exempt from
anti-trust laws, that baseball's federal anti-trust exemption was within the
area preempted from state regulation, and that reserve system did not consti-
tute involuntary servitude.
Judgment in favor of defendants.
1. Monopolies— 12(6)
Professional baseball remains exempt from anti-trust laws unless and until
Supi-eme Court or Congress holds to conrrary. Sherman Anti-Trust Act, § 1 et
seq., 15 U.S.C.A. § 1 et seq. ; Clayton Act, § 1 et seq., 15 U.S.C.A. § 12 et seq.
2. Monopolies— 12(6)
Professional baseball player bringing suit for declaratory judgment that
reserve system, which gives club right to player's services for as long as it
wishes to renew his contract, subject only to player's right to retire from
S The Houpe hearinfrs Avere stated to be on "the pro'olem of whether or not orscanized
baseball should be exemi»ted from the operation of the antitrust laws." Hearings orr
"Organized Baseball" before the House Subcommittee on Study of Monopoly Power of
the Committee on the .Tudiciarv. 82d Cong., 1st Sess.. p. 1.
9 H. R. Rep. No. 2002 (entitled "Organized Baseball"), S2d Cong., 2d Sess.. p. 2.S0.
Between the hearings and the report, the Subcommittee on Study of Monopoly Power
was reconstituted as the Antitrust Subcommittee. The report was submitted directly
to the full House pursuant to H. Res. 95, S2d Cong., 1st Sess.
10 Id., at 134-136, 231-232.
45
baseball, be declared illegal was not entitled to any relief with respect to-
aims that the system was in violation of the anti-trust law in view of base-
ball's exemption from anti-trust laws. Shei-man Anti-Trust Act, § 1 et seq., 15
U.S.C.A. § 1 et seq. ; Clayton Act, § 1 et seq., 15 U.S.C.A. § 12 et seq.
3. Commerce — 43
As interstate commerce, professional baseball is subject to regulation by
Congress.
4. Monopolies — 12(6)
Reserve system of professional baseball falls squarely within scope of base-
ball's federal ani-trust exemption as promulgated by United States Supreme
Court decisions and is thus in area preempted from regulation under state
anti-trust laws.
5. Commerce — 8(1)
State and local laws may not unduly burden interstate commerce.
6. Courts— 284
Federal district court has jurisdiction to provide for a civil remedy relief"
for violation of Thirteenth Amendment and its enforcing legislation which pro-
hibits holding anv person to involuntary servitude. U.S.C.A. Const. Amend. 13;
18 U.S.C.A. § 1584; 28 U.S.C.A. §§ 1331, 1343.
7. Constitutional Law— 83(2)
Showing of compulsion is prerequisite to proof of involuntary servitude
prohibited by Thirteenth Amendment and the enforcing legislation. U.S.C.A.
Const. Amend. 13 ; 18 U.S.C.A. § 1584.
8. Constitutional Law— 83(2)
Professional baseball player, who had a right to retire from baseball and^
embark upon a different enterprise outside organized baseball, could not show
necessary element of compulsion to establish baseball reserve system as viola-
tive of Thirteenth Amendment. U.S.C.A. Const. Amend. 13; IS U.S.C.A. § 1584.
Paul. Weiss. Goldberg, Rifkind, Wharton & Garrison, New York City, Allan'
H. Zerman, Clayton. Mo., for plaintiff: Arthur J. Goldberg, Jay H. Topkis,
Richard M. Moss. Daniel Levitt, Max Gitter, William D. Iverson, New York
Citv, of counsel.
Donovan, Leisure, Newton & Irvine, New York City, for defendant Bowie K.
Kuhn ; George S. Leisure. Jr., John E. Tobin, New York City, of counsel.
Arnold & Porter, Washington, D. C, for defendant Bowie K. Kuhn; Paul A.
Porter, Victor H. Kramer, Washington, D. C, Douglas G. Robinson, Washing-
ton, D. C. of counsel.
Wilkie. Farr & Gallagher. New York City, for all defendants except Bowie
K. Kuhn ; Louis F. Carroll, Mark F. Hughes, Louis L. Hoyues, Jr., Barry Rona,
Robert J. Kheel, New York City, of counsel.
Baker, Hosteller & Patterson, Cleveland, Ohio, for defendant Joseph E.
Cronin. President of American League of Professional Baseball Clubs, and all
American League Clubs: Alexander H. Hadden, James P. Garner, G. Warrert
Daane, Sargent Karch, Cleveland, Ohio, of counsel.
Cooper, District Judge.
On October 8. 1969, Curtis C. Flood, then a major league professional base-
ball player for the St. Louis Cardinals, was "traded," his contract transferred
and as.signed to another National League baseball club, the Philadelphia Phil-
lies, as part of a multi-player transaction between the two clubs. At the time of
the trade he was thirty-two years old, a veteran of twelve years service with
the Cardinals, co-captain of the team, and acknowledged to be a player of
exceptional and proven baseball ability. Unhappy and disappointed. Flood was
unwilling to play for Philadelphia, but forbidden by his contract and the rules
of organized professional baseball from negotiating with any other ball club.
He initiated this action on January 16, 1970 against the twenty-four major
league clubs comprising the American and National Leagues of organized base-
ball, their respective Presidents, and against the Commissioner of Baseball
asserting in four separate causes of action that baseball's "reserve system" is
unlawful.! Briefly stated, the reserve system, commonly referred to as the
1 A fifth and Inrgelv unrelated cause of action asainst the St. Louis Cardinals and
New York Yankees attacked as anti-competitive and in violation of federal anti-tnist
laws certain alleged relationships between those clubs and other baseball enterprises.
7S-465— 72— pt. 1 4
46
"reserve clause," consists of a number of baseball rules, regulations and uni-
form contract terms which together operate to bind a player to a ball club and
restrict him to negotiating with that club only.
The first of plaintiff's four causes of action alleges that the reserve system
constitutes a conspiracy among the defendants to boycott the plaintiff and to
prevent him from playing baseball other than for the Philadelphia club in
violation of the Sherman and Clayton Anti-Trust Acts. His second and third
causes of action are state law claims against eleven of the twenty-four club
defendants 2 with juristliction based on diversity of citizenship. The second
contends that the reserve system and defendants' practices thereunder consti-
tute violations of the antitrust laws of New York, California and the other
states where major league baseball is played and also violate state civil rights
statutes, while the third contends that by the reserve system defendants have
restrained the plaintiffs '"free exercise of playing professional baseball in
New York, California, and the several states in which defendants stage base-
ball games, in violation of the common law." His fourth cause of action,
directed against thirteen club defendants and alleging federal question and
civil rights jurisdiction under 2S U.S.C. §§ 1331 and 1343, asserts that the
reserve system is a form of peonage and involuntary servitude in violation of
the anti-peonage statutes. 42 U.S.C. § 1994 and 18 U.S.C. § 1581, and the
Thirteenth Amendment and that it deprives him of "freedom of labor" in
violation of the Norris-LaGuardia Act, 29 U.S.C. §§ 102, 103.
By way of relief plaintiff seeks a declaration of the illegality of baseball's
reserve system, an injunction restraining defendants from agreeing among
themselves to refuse him employment, and certain damages allegedly sus-
tained since December 30, 1969 as a result of defendants' refusal to bargain
with him as a free agent.
Following the filing of his comjilaint, plaintiff moved before this Court on
February 3, 1970 for a preliminary injunction declaring him a free agent, or,
as we viewed it alternatively, permitting him to remain as a player for St.
Louis pending a final determination of the merits. On March 4, 1970 we denied
this application for an injunction pendente lite on the grounds that it would
disturb the status quo: that the balance of hardship did not tip decidedly in
plaintiff's favor ; and that there was insuflScient showing of probable eventual
success on the merits of any of his four causes of action. Flood v. Kuhn, 309 F.
Supp. 793 ( S.D.N. Y.1970).
On March 24, 1970 we granted plaintiff's application for an early trial. On
April 23, 1970 we deferred action, pursuant to Rule 12(d), F.R.Civ.P., on
defendants' motions to dismiss the first four causes of action, but granted
summary judgment dismissing the unrelated fifth cause of action above-
mentioned against the St. Louis Cardinals and New York Yankees. Flood v.
Kuhn, 312 F. Supp. 404 (S.D.N. Y.1970).
The remaining four causes of action contesting the legality of baseball's
reserve system wei'e tried to this Court from May 19 to June 10, 1970. The trial
record consists of some 2000 pages of transcript and 56 exhibits. At the close of
trial we reserved decision and fixed July 13, 1970 as the date for all post-trial
memoranda.
We resolved to allow great liberality in the making of the total trial record
to the end that each theory or contention advanced by the litigants would be
amply covered and dealt with when all the proof was in.
BASEBALL AND THE RESERVE SYSTEM
Baseball is our national pa.stime and has been so for well over a century.
Most of our interest in the sport as fans and spectators centers around
professional or organized baseball. Organized baseball consists of the twenty-
four major league teams which comprise the American and National Leagues
and the various tiers of minor leagues which serve principally as training
grounds for aspiring players. Tr. 645—46.3 There exist no competitive profes-
sional teams in North America outside this structure. Id. All are governed by
either the Major League Rules or the corresponding Professional Baseball Rules
(applicable to the minor leagues) and are subject to the broad powers of the
Commissioner of Baseball. Tr. 647-52 ; Major League Agreement, Articles I, IV,
VII, IX.
2 No individual is n.imed as a defendant.
3 "Tr." followed by a number refers to pages of the trial transcript herein.
47
At the center of this single, unified but stratified organization of baseball
leagues is the reserve system, the essence of which has been in force for nearly
one hundred years, almost the entire history of organized professional base-
ball. All teams in organized baseball agree to be bound by and enforce its
strictures. It is perhaps the cornerstone of the present structure in that it
insures te.Tm continuity and control of a supply of ballplayers. It is the heart
of plaintiff's complaint.
From the standpoint of the professional baseball player, its effect is to deny
him throughout his career freedom to choose his employer. Since 1965 each
new player seeking to enter baseball has been exposed to a draft by the major
and minor league clubs. See Major League Rule 4. If selected by a club in this
semi-annual draft, he may bargain only with that club ; should he wish not to
play for that club he must wait until the next draft is held. Id.
Regardless of whether his entry into organized baseball is through the player
draft or as a free agent, he must sign a Uniform Player's Contract, the only
form of contract permitted between player and club, which empowers the .sign-
ing club unilaterally to renew his contract continuously from year to year
should he and the club fail to come to terms on a new agreement.* Once signed
he is hereafter forbidden to negotiate toward prospective baseball employment
with any club other than the one to whom he is under contract.^ Thus, the
club has" a right to his services for as long as it wishes to renew his contract,
subject only to his right to retire from baseball. The total number of ballplay-
ers so controlled is limited l)y the provision that no major league club may
have over forty active players under contract and on its reserve list.«
If it chooses, a club may assign a players contract to another club without
consulting the player or obtaining his con.sent." Should his contract be assigned
his new club becomes heir to all of the above-mentioned rights and obligations
vis-a-vis the player. § If a player refuses to sign his contract and play, as
4 Rule 3(a) of the Major League Rules and Professional Baseb.all Rules agreed to
bv all professional basehal! clubs requires that each club contract with its players
only pursuant to the Uniform Player contract prescribed by the Major League Executive
Council and specifically that "no club shall make a contract * * * containing a non-
reserve clause." Further. "[t]he making of any agreement between a club and a player
not embodied in the contract shall subject both parties to discipline ; and no such
agreement whether written or verbal, shall be recognized or enforced."
The renewal clause is contained in paragraph 10(a) of the Uniform Player Contract
and provides that if in the year of expiration of the contract a player and club do not
reach agreement on a new contract by a certain date "the Club shall have the right
by written notice to the Player at [his] address to renew this contract for the period
of one year on the same terms, except that the amount payable to the Player shall be
such as the Club shall fix in said notice * * * at a rate not less than 80% of the
rate stipulated for the preceding year." Any contract so renewed would itself contain
this renewal clause.
5 Rule 3(g) of the Major League and Professional Baseball Rules provides:
"(g) TAMPERING. To preserve discipline and competition, and to prevent the entice-
ment of players, coaches, managers and umpires, there shall be no negotiations or
dealings respecting employment, either present or prospective, between any player,
coach or manager and any club other than the club with which he is under contract
or acceptance of terms, or by which he is reserved or which has the player on its
Negotiation List, * * * unless the club or league with which he is connected shall
have, in writing, expressly authorized such negotiations or dealings prior to their
commencement."
6 The reserve rule Major League Rule 4-A, provides in part :
"On or before November 15 in each year, each Major League Club shall transmit to
the Commissioner and to its League President a list of not exceeding forty (40) active
and eligible players, whom the club desires to reserve for the ensuing season ; and also
a list of all its' players who have been promulgated as placed on the Military, Volun-
tarily Retired. Restricted. Disqualified, Suspended or Ineligible Lists ; and such pla.vers
sign-^d under Rule 4 who do not count in the club's under control limit. * * * [Njo
player on any list shall be eligible to play for or negotiate with any club until his
contract has been assigned or he has been released."
Of the forty active players on a club's reserve list, fifteen are generally minor league
players since "a major league team may have a maximum of twenty-five players on its
active roster. Major League Rule 2. There are more players in the minor leagues than
these remaining fifteen plavers reserved by each major league club. These minor league
players who are not reserved by a major league club may in turn be reserved by their
minor league club. Professional Baseball Rules 2 and 4-A. Such pla.vers are also subject
to an annual draft by all the major league clubs. Rule 5 of the Major League and
Professional Baseball Rules. . ■■ . 4.
7 Rule 9 of the Major League and Professional Baseball Rules provides in part :
"A club may assign to another club an existing contract with a player. The player
upon receipt of written notice of such assignment is by his contract [paragraphs 6(a)
of the Uniform Player Contract] bound to serve the assignee." .^ .
8 Rule 9 of the Major League and Professional Baseball Rules further provides in
^^"After the date of such assignment all rights and obligations of the assignor clubs
thereunder shall become the rights and obligations of the assignee club except as
otherwise provided in Rule 4. ♦ * *"
48
Flood has, he is placed on a Resfricted List whereby the club last holding his
contract, in this case riiiladelphia," retains the exclusive right to negotiate
with the player.io Only if released does a player become a free agent ; he can-
not achieve such status by his own choosing. ^^
Plaintiff's witnesses in the main concede that some form of reserve on play^
ers is a necessary element of the organization of baseball as a league sport, but
contend that the present all-emliracing system is needlessly restrictive and offer
various alternatives which in their view might loosen the bonds without sacri-
fice to the ganK/"- Plaintiff points to the present experience of other profes-
sional sports suv-h as football, basketball and hockey, each of which survives
relatively comfortably with a reserve system or organizational structure whose-
elements to a varying extent offer more freedom of choice and flexibility to its
players. Tr. 448-590 (see especially: football, Tr. 4G3, 4(36-67, 480, 490; basket-
ball, Tr. 520-23; hockey, Tr. 552-53, 559-60. 569, 572, 577, 582-84, 587);
Plaintiff's Exhibits 12, 13, 14, 16, 17, 18, 19 and 20 in evidence.
The defendant clubs and Commissioner of Baseball, on the other hand, con-
tend that the restrictions of the present system are reasonable and necessary to
preserve the integrity of the game, maintain balanced comijetition and fan
interest, and encourage continued investment in player development ; that none
of the alternatives suggested by plaintiff would be workable and still satisfy all
three of these criteria ; and that, upon comparison, baseball with its player
safeguards ^^ is hardly more restrictive in its reserve system than are the
other professional sports. See Tr. 652-913, 932-1121, 1232-1545. Defendants
point to the instability in the early history of baseball and before institution
of the reserve system as evidence of the danger to be anticipated from any
modification of its substance. See Plaintiff's Exhibit 15-A in evidence (the
Celler Report entitled "(Organized Baseball," Sul>committee on the Study of
Monopoly Power of the Committee of the Judiciary of the House of Representa-
tives, 82nd Cong., 2d Sess. (1952) ).
THE RESERVE SYSTEM A NECESSITY?
Prior to trial we gained the impression that there was a view, held by
many, that baseball's reserve system had occasioned rampant abuse and that it
should be abolished. We were struck by the fact, ho\^•ever, that the testimony
at trial failed to support that criticism ; we find no general or widespread
disregard of the extremely important position the player occupies. Cf. note 16,
infra.
Clearly the preponderance of credible proof does not favor elimination of
the reserve clause. With tlie sole exception of plaintiff" himself,^* jt shows that
even plaintiff's witnesses do not contend that it is wholly undesirable ; in fact
they regard substantial portions meritorious. It lends support to our view.
9 By virtue of the assignment of Flood's eontract by St. Louis to Philadelphia and
the exercise by Philadelphia of its option to renew.
10 Rule 15, Major League and Professional BasebaU Rules.
11 Before a player may be unconditionally released and his contract terminated he-
must be placed on waivers making his contract available to every other major league-
club. Major League Rule S. See also, Uniform Player Contract, paragrapli 7.
12 Modifications of and alternatives to the present reserve system suggested by plain-
tiff include: (a) independent competitive leagues: (b) limitation of club control over
a player to a fixed term of years: (c) permitting a player to become a free agent
after an option period; (d) trade veto for veteran players; (e) minimum salary
progression: (f) reduction in the number of reserved players; (g) salary arbitration.
Consideration was given them both individually and in combination. Various refine-
ments were advanced to meet certain objections raised as to proposals (b) and (c).
including a right of first refusal given to the player's club to match any offer obtained
by the player, a restriction of negotiations to only clubs in the other league and then
onlv in the off-season, and/or a more equalized division of baseball revenues among
clubs. See Tr. 221-22, 2.35, 237-38, 247, 255-58, 1906-67, 1981-84, 1985-80, 2020-23.
13 Defendants include tlie following safeguards of fair treatment: (a) the forty
player reserve limit (Major League Rule 4— A) ; (b) the waiver rules (Major League-
Rule 10) ; (c) the minor league draft (Major League Rule 5) : (d) the maximum
permissible salary cut provision (Uniform Player Contract, para. 10) ; (e) termination
pay (Uniform Player Contract, para. 7) ; (f) the requirement of consent before
assigning a veteran to the minor leagues (Major League Rule 9 (g) : (g) the minimum
salary provision (Uniform Player Contract) ; (h) Major League Baseball Players
Benefit Plan.
14 Flood stated near the close of his testimony, "I would like the whole system to-
be struck down and declared illegal," adopting as his view the proposition that "no-
provision in that system * * * is beneficial either to the players or to organized, base-
ball." Tr. 118 and 121.
49
-expressed at another point in this opinion, that arbitration or rsegotiation
would extract such troublesome fault as may exist in the present system and,
preserving its necessary features, fashion the resei've clause so as to satisfy all
parties.
Thus, former baseball star Jack (Jackie) Robinson responded to questioning
in this regard as follows :
'•Q Do I understand, however you interpret the expression 'reserve clause'
or 'reserve system,' that your testimony is that you favor modifications of that
system? Is that right?
A [Robinson] That is correct, I do.
Q You don't favor destruction of the system, do you?
A No, Sir." Tr. 217. See Tr. 218-19. See also Tr. 198, 216.
Witness Henry (Hank) Greenberg, also a former star player, was of the
opinion :
"I think the players themselves, having functioned under the reserve system
all these years, recognize the fact that the club has some equity in the players'
services. * '■' *" Tr.
247. See also, Tr. 236, 248.
And former club owner William Veeek declared :
"Well, the complete elimination of the reserve system or the reserve clause
in contracts I think would not be helpful to baseball. I am afraid that if you
suddenly terminated and there was no control of contracts by any club, that it
could — and I say only could — result in some rather chaotic conditions. I feel,
however, that this would not be the case if it were done in an orderly manner.
*******
I feel that there should be some kind of a contractual relationship extending
over a period of years. * * I don't mean it should stop and there should be
nothing in its place." Tr. 1965, 1966.
THE FEDERAL ANTITRUST CLAIM
The Supreme Court held in 1922 that professional baseball was not within
the scope of t'ne federal antitrust laws because the exhibitions were purely state
affairs to which the interstate transportation of players was merely incidental
and were not trade or commerce in the ordinarily accepted use of the words.
Federal BasetaJl Vluh of Baltimore, Inc. v. National League of Professional
Baseball Clnhs, 259 U.S. 200, 42 S.Ct. 465. 66 L.Ed. 898 (1922).
When this question again reached the Supreme Court in 1953, intervening
•decisions appeared to have vitiated any holding that baseball was not subject
to the antitrust laws because its activities either did not sufficiently affect or
were not interstate commerce. See Gardella v. Chandler, 172 F.2d 402 (2d Cir.
1949). Without reexamining this underlying issue of interstate commerce, how-
ever, the Supreme Court reaffirmed its prior decision in Federal Baseball "so
far as that decision determines that Congress had no intention of including
the business of baseball within the scope of the federal antitrust laws." Toolson
V. Neiv York Yankees, Inc., 346 U.S. 356, 74 S.Ct. 78, 98 L.Ed. 64 (1953). The
reasons assigned for that conclusion were that baseball had developed for thirty
years in reliance on its "understanding that it was not subject to existing
antitrust legislation ;"' that Congress had not seen fit to bring baseball under
the antitrust laws "by legislation having prospective effect ;" that the existing
legislation should not be held applicable with "retrospective effect;" and that
"if there are evils in this field which now warrant application to it of the anti-
trust laws it should be by legislation."
Subsequent decisions established that Toolson "was a narrow application of
the rule of stare decisis" applicable only to baseball and to no other industry or
professional sport. RadovicJi v. National Football League, 352 U.S. 445, 77 S.Ct.
390, 1 L.Ed.2d 456 (1957) ; United States v. International Boxing Club, 348
U.S. 236. 75 S.Ct. 259. 99 L.Ed. 290 (1955) : United States v. Shubert, 348 U.S.
222, 75 S.Ct. 277. 99 L.Ed. 279 (19-55). Specifically, four years after Toolson, the
Supreme Court held the antitrust laws applicable to professional football and
its reserve system, while continuing to distinguish baseball as the only sport
encompassed within its prior contrary determination in Federal Baseball. See
Radovich v. National Football League, supra.
In brief, plaintiff asserts the following in support of his contention that these
decisions do not bar this Court from anticipating their demise and granting
him relief :
50
"Changes in baseball since 1922, or ever since 1953, have thrust the game
squarely within contemporary concepts of interstate commerce. And the reli-
ance interests of the team owners, when properly analyzed in light of the
liberalized doctrine allowing prospective relief and the plaintiff's request for
only such relief, presents no barrier. Finally, the silence of Congress since 1953
argues for, rather than against, a judicial reexamination of the discretionary
judgment exercised in Toolson." Plaintiff's Post-Trial Brief, July 7, 1970, p.
47.
In our decision of March 4, 1970 denying plaintiff a preliminary injunction,
we considered in some depth these and certain other arguments made by plain-
tiff and concluded that "several weighty factors compel the conclusion that the
overruling of Toolson is by no means the probable result of this litigation."
Flood V. KuUn, 309 F.Supp. 793, 801-805 (S.D.N.Y.1970). In general, we based
this conclusion on the fact that Toolson held Congress had no intention to
bring baseball within the antitrust laws, and did not rest on any presumed
absence of interstate commerce ; that prospective relief of the nature envisaged
by plaintiff would be unprecedented ; that, in any event, such court-imposed
relief might still have a serious retrospective effect on the reliance interests of
baseball; that the continued silence of Congress may take on a.spects of ratifica-
tion in light of the importance attached thereto in these decisions of the
Supreme Court ; and, finally, that "decisions of the Supreme Court are not
lightly overruled, particularly those which have a history as long as this one
* * * whatever may be out view of the rightness of plaintiff's claim. * * *" We
find the trial before us amplifies those expressed views.
Subsequent to our determination of the motion for a preliminary injunction,
and to the trial of the issues herein, we were supported in these same views by
the recent decision of our Circuit in Salerno and Valentine v. American
League of Professional BasehaU Cluhs et al., 429 F.2d 1003 (2d Cir., July 13,
1970). Salerno is unquestionably conclusive, at least at this level, of the Federal
antitrust issues herein. The panel in an opinion by Judge Friendlv unanimously
held :
"We freely acknowledge our belief that Federal Baseiall was not one of Mr.
Justice Holmes' happiest days, that the rationale of Toolson is extremely dubi-
ous and that, to use the Supreme Court's own adjectives, the distinction
between baseball and other professional sports is 'unrealistic.' 'inconsistent'
and 'illogicak' Radovich v. National Football League. 352 U.S. 445. 452, 77 S.Ct.
390, 1 L.Ed.2d 4.56 (1957). We add that Boys Mkts., Inc. v. Retail Clerk's
Local 770, 398 U.S. 235, 90 S.Ct. 1583, 26 L.Ed. 2d 199, decided June 1. 1970,
overruling Sinclair Refining Co. v. Atkinson, 370 U.S. 195, 82 S.Ct. 1328, 8
L.Ed.2d 440 (1962), despite Congress' failure to act on invitations to do so,
may pressage a change from the attitude with respect to such inaction that
was expressed in Toolson, 346 U.S. at 357, 74 S.Ct. 78, which Mr. Justice Black
in dissent invoked to no avail. However, putting aside instances where factual
premises have all but vanished and a different principle might thus obtain, we
continue to believe that the Supreme Court should retain the exclusive privilege
of overruling its own decisions, save perhaps when opinions already delivered
have created a near certainty that only the occasion is needed for pronounce-
ment of the doom. While we should not fall out of our chairs with surprise at
the news that Federal Baseball and Toolson had been overruled, we are not at
all certain the Court is ready to give them a happy de.spatch."
[1. 2] Salerno mandates that plaintiff's federal antitrust claims be denied.
Since baseball remains exempt from the antitrust laws unless and until the
Supreme Court or Congress holds to the contrary, we have no basis for pro-
ceeding to the underlying question of whether baseball's reserve system would
or would not be deemed reasonable if it were in fact subject to antitrust
regulation.
LABOR ANTITRUST EXEMPTION
Despite our firm belief (as hereinafter advanced) that these issues can and
should be resolved by negotiations between the players and the club owners, we
remain in doubt as to whether this matter stands exempt from the antitrust
laws because it is a mandatory subject of collective bargaining. Defendants
contend that a consistent application of Amalgamated Meat Cutters v. Jewel
Tea Co., 381 U.S. 676. 85 S.Ct. 1596, 14 L.Ed. 2d 640 (1965) admits of no other
result. Plaintiff submits that defendants misread Jewel Tea ; that "benefits to
organized labor cannot be utilized as a cat's paw to pull employers' chestnuts
51
out of the antitrust fires ;" and that United States v. Women's Sportswear
Mfr's Assn, 336 U.S. 460, 464, 69 S.Ct. 714, 716, 93 L.Ed. 80-5 (1949) requires
rejection of an antitrust immunity for this reserve system created and
imposed by the club owners long before the arrival of collective bargaining.
We need not reach this difficult question in light of our disposition that the
Supreme Court alone is privileged to overrule TooUon and hold baseball subject
to the antitrust laws.
STATE LAW CLAIM
Plaintiff next asserts in two separate causes of action that the reserve sys-
tem violates state law, both statutory and common. He argues that defendants
cannot have it both ways : that if the federal antitrust laws do not reach
baseball then state antitrust, civil rights and labor statutes and common law
are applicable. We disagree.
Plaintiff would surely be correct if Toolson were no more than a reaffirma-
tion of Federal Baseball based on a supposed absence of interstate com-
merce. However, Toolson cannot be so read. As our Circuit recently held, "the
ground upon which Toolson rested was that Congress had no intention to
bring baseball within tlie antitrust laws, not that baseball's activities did not
sufficiently affect interstate commerce." Salerno and Valentine v. American
League of Professional Baseball Clubs et al., supra.
[3] As interstate commerce, baseball is subject to regulation by Congress.
Cf. American League and Ass'n of Umpires, 180 N.L.R.B. No. 30, Case 1-RC-
10414 (December 15, 1969). It has been held exempt from existing antitrust
legislation covering other related and integrated activities. It is not for this
Court to write off Toolson as an anomaly. Its rationale must be given effect.
We believe it unlikely that the Supreme Court would have held, as it did, that
baseball's reliance interests precluded overruling Federal Baseball and that
"Congress had no intention of including the business of baseball within the
scope of the federal antitrust laws," if it considered baseball vulnerable to
state regulation. Enforcement of such state laws would appear to produce a
result inconsistent with the objective of the federal antitrust laws interpreted
by the Supreme Court as excluding the business of baseball.
Thus, we agree with the reasoning expressed by certain of the majority of
the Supreme Court of Wisconsin in holding its state antitrust laws could not
be applied to prevent transfer of a baseball club franchise :
"The [United States Supreme] court has also said that while various tests
may be used for guidance as to the re.gulatory power left to the states where
Congress is silent, the ultimate question is whether the state action conflicts
with national policy. * * *
* * * il! * * *
The situation which confronts us is not one where Congress has been silent
as to a particular type of regulation in a broad field of interstate commerce,
where the proposition may readily be implied that although no need has been
found for federal regulation, state regulation of local aspects may be quite
appropriate. Rather, here. Congress has remained silent as to regulation of a
particular industry, either by imposition of antitrust laws or otherwise, in the
face of and seemingly in response to a series of judicial decisions which
uniquely and emphatically pose the question to Congress of whether there shall
be regulation in antitrust terms or otherwise.
* it^ * * it * *
It is plausibly argued that silence of Congress in this context demonstrates
congressional recognition that league structure and the related agreements and
rules are integral parts of professional baseball as it exists, and that the
application of the familiar type of antitrust legislation to the structural
arrangements of organized baseball is inappropriate ; * * * that there is to be
self -regulation until such time as Congress decides that the public interest
requires other control.
ifi * * * if * *
* * * We deem it unrealistic to interpret these decisions of the supreme court
of the United States plus the silence of Congress as creating a mere vacuum
in national policy, leaving the states free to regulate the membership of the
baseball leagues." State v. Milwaukee Braves, Inc., 31 Wis.2d 699. 144 N.W.2d
1, 16-18, cert, denied, 385 U.S. 990, 87 S.Ct. 598, 17 L.Ed.2d 451 (1966). See
also, id. at n. 17.
52
[4] Although transfer of a team franchise is certainly distinguishable
(particularly with regard to the likelihood of state discrimination in favor of
its own economic interests) from restraints imposed by the reserve system
upon players' freedom to negotiate, the reasoning of Milwaukee Braves is still
persuasive here. The reserve system, which was the subject of Toolson's com-
plaint, certainly falls squarely within the scope of baseball's federal antitrust
exemption and, thus, within the area preempted from state regulation.
Even if the Supreme Court decisions and the silence of Congress fail to
establish or indicate a national policy regarding baseball sufficiently certain to
rise to the level of federal preemption, nevertheless we believe the nationwide
character of organized baseball combined with the necessary interdependence
of the teams requires that there be unifoi'mity in any regulation of baseball
and its reserve system. In Mllicaukce Braves the other members of the major-
ity preferred the view, at least as to matters such as league structure, that
"since organized baseball operates widely in interstate commerce, the regula-
tion, if there is to be any, must be prescribed by Congress." Id. at IS.
[5] We do not believe that the operation of baseball and its reserve system
is a matter which admits of diversity of treatment. State and local laws may
not unduly burden interstate commerce.
"When the regulation of matters of local concern is local in character and
effect, and its impact on the national commerce does not seriously interfere
with its operation, and the consequent incentive to deal with them nationally
1s slight, such regulation has been generally held to be within state author-
But ever since GihTjons v. Ogden, [9 Wheat. 1. G L.Ed. 23,] * * * the states
have not been deemed to have authority to impede substantially the free flow
of commerce from state to state, or to regulate those phases of the national
r-ommerce which, because of the need of national uniformity, demand that
their regulation, if any. be prescribed by a single authority. * * * Whether or
not this long-recognized distribution of power between the national and the
state governments is predicated upon the implications of the commerce clause
itself * * * or upon the presumed intention of Congress, where Congress has not
spoken * * * the result is the same." Southern Paeifie Co. v. Arizona ex rel.
Sullivan, 325 U.S. 761, 7G7-76S. 65 S.Ct. 151, 1519, 89 L.Ed. 1915 (1945).
As we see it, application of various and diverse state laws here would seri-
ously interfere with league play and the operation of organized baseball. Cf.
American League and Ass'n of Umpires, supra.
Accordingly, plaintiff's state law claims, common law and statutory alike,
must be denied. Just as we found it unnecessary to determine whether plain-
tiff's federal antitrust claims were barred by the labor antitru.st exemption, so
too, here, we need not resolve whether Loeal 2^f, International Brotherhood of
Teamsters etc. Union v. Oliver, 358 U.S. 283, 296, 79 S.Ct. 297, 3 L.Ed.2d 312
(1959) applies and whether the federal labor law scheme leaves no room for
the application of state antitrust policy to baseball's reserve system.
INVOLUNTARY SERVITUDE CLAIM
[6] Plaintiff's fourth cause of action asserts that the reserve system violates
the Thirteenth Amendment and its enforcing legislation which similarly pro-
hibits holding any person to "involuntary servitude." 18 U.S.C. § 1584."^5
Although neither expressly provides for a civil remedy, jurisdiction to grant
relief for a violation of such provision may be found in 28 U.S.C. §§ 1331 and
1343. See Reitmeister v. Reitmeister, 162 F.2d 691. 694 (2d Cir. 1947) ; Bryant
V. Donnell. 239 F.Supp. 681, 683 (W.D. Tenn.1965). See also. Bell v. Hood,
327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946).
Plaintiff acknowledges that this claim presents a case of first impres.sion.
He relies principallv on a 1914 decision of a New York Supreme Court, Ameri-
can League BasehaJl Chtt) v. Chase, 86 Misc. 441, 465. 149 N.Y.S. 6. 19 (1914),
whif^'h is quoted from at some length by -Tudge Frank in Gardella v. Chandler,
172 F.2d 402, 409-410 (2d Cir. 1949). However, Judge Frank reco<inized that
terming the reserve system "peonage" was "perhaps a bit exaggerated" and
15 Plaintiff's post-trial brief argues only tliat tlie reserve system creates a system
of involuntary servitude. Apparentlv. he no lonsrer contends either that such a system
creates a condition of peonae;e, IS U.S.C. § 1.5S1 and 42 U.S.C. § 1904, or that it
violates the public policy declared in the Norris LaGuardia Act. 29 U.S.C. §§ 102, 103.
We have considered such sections nevertheless and have concluded that they have no
application here.
S3
concluded that "I am not to be understood as implying that [it] violate[s] the
Thirteenth Amendment or the statutes enacted pursuant thereto." Gardella v.
Chandler, supra at 410.
In Pollock V. Williams, 322 U.S. 4, 17, 64 S.Ct. 792, 799, 88 L.Ed. 1095 (1944),
the Supreme Court, reviewing a state statute authorizing criminal sanctions
against any person who fails to perform a personal service contract on which
he has obtained an advance, stated that the '"undoubted aim of the Thirteenth
Amendment * * * was not merely to end slavery but to maintain a system of
completely free and voluntary labor throughout the United States." Following
that general proposition, the Supreme Court in Pollock specified its holding
with respect to peonage and the Thirteenth Amendment :
"Whatever of social value there may be, and of course it is great, in enforcing
contracts and collection of debts. Congress has put it beyond debate that no
indebtedness warrants a suspension of the right to be free from compulsory
service. This congressional policy means that no state can make the quitting of
vv'ork any component of a crime, or make criminal sanctions available for
holding unwilling persons to labor." Id. at 18, 64 S.Ct. at 799.
Similarly, with regard to involuntary servitude and the Thirteenth Amend-
ment, the Supreme Court in Hodges v. United Slates, 203 U.S. 1, 16, 27 S.Ct.
6, 8, 51 L.Ed. 65 (1906) stated:
"The things denounced are slavery and involuntary servitude. * * * All
understand by these terms a condition of enforced compulsory service of one to
another."
Our Circuit has held that threats of deportation in order to retain an
employee's services do not constitute holding to involuntary servitude within
the proscription of IS U.S.C. § 1584, the statute relied on by plaintiff. See
United States v. Shackney, 333 F.2d 475 (2d Cir. 1964). The court sought to
avoid bringing the criminal law into play "whenever an employee asserts that
his will to quit has been subdued by a threat which seriously affects his future
welfare but as to which he still has a choice, however painful." Id. at 487.
Involuntary servitude is defined therein as follows :
"But a holding in involuntary servitude means to us action by the master
causing the servant to have, or to believe he has, no way to avoid continued
service or confinement, * * *" Id. at 486.
[7, 8] A showing of compulsion is thus prerequisite to proof of involuntary
servitude. Concededly, plaintiff is not compelled by law or statute to play base-
ball for Philadelphia. We recognize that, under the existing rules of baseball,
by refusing to report to Philadelphia plaintlfE is by his own act foreclosing
himself from continuing a professional baseball career, a consequence to be
deplored. Nevertheless, he has the right to retire and to embark upon a differ-
ent enterprise outside organized baseliall. The financial loss he might thus
sustain may affect his choice, but does not leave him with "no way to avoid
continued service. * * *" Id. Therefore, as stated in Wicks v. Southern Pacific
Co., 231 F.2d 130, 138 (9th Cir. 1956) :
"There is no contention that appellants cannot freely leave their employment
with the railroads. * * * W^hile leaving their present employment would entail
serious losses in terms of seniority rights, medical benefits and retirement bene-
fits, the fact remains that appellants are not being compelled or coerced to
work against their will for the benefit of another."
Accordingly, we find that plaintiff" has not satisfied the essential element of
this cause of action, a showing of compulsory service.
THE CONFLICTS ARE RECONCILABLE
Before concluding this opinion, we wish to unburden ourselves of two strong
and related convictions w^hich we took away from this trial. First, despite the
opposing positions of plaintiff" and the Major League Baseball Players' Associa-
tion on the one hand, the present management and club owners of organized
baseball on the other, we found the witnesses appearing on behalf of both sides
in the main credible and of high order ; they have a genuine enthusiasm for
baseball and with constancy have the best interests of the game at heart.i*5
16 This is true no less of the clnb owners than of the players. Hall of Fame immortal
Henry Greenberg who participated in baseball first as a player and then as an owner-
manager stated, "[the public] has the idea that the owners are just people primarily
interested in profits, no concern for the players, which is not true." Tr. 237. We found
94
Second, we are convinced that the conflicts between the parties are not
irreconcilable and that negotiations could produce an accommodation on the
reserve system which would be eminently fair and equitable to all concerned—
in essence, what is called for here is continuity with change.
This issue is not so unique or complex and the parties are not at such log-
gerheads that negotiations could not succeed. What we have already said under
"The Reserve System, A Necessity?," effectively supports this conclusion. Trial
testimony developed several proposed modifications that could serve as bases
from which negotiations might proceed toward an accommodation of the valid
interests of both sides. See note 12, supra.
Plaintiff's witnesses expressed a belief that this matter was capable of being
resolved by good faith bargaining between the parties. Thus, Mr. Miller,
executive director of the Major League Baseball Players" Association, recited
the various modifications suggested by the players and declared a continuing
desire to resolve this dispute. Tr. 1901. He summed up the Association's bar-
gaining position at the various meetings held with management regarding the
reserve system as follows :
"Basically * * * it was our position that the reserve rule system was illegal
in that its restrictions were just about total, that it was inconceivable to us
that you could have a game of baseball with no rules, but that it seemed quite
reasonable to us that modifications which were less restrictive than the
present system could be made, were practical, and presumably could make the
system safe from attack in terms of its illegality." Tr. 1904. i'
The Major League Ba.seball Players' Association, organized in 1954, has
proved a particularly effective bargaining representative obtaining since 1966
highly significant benefits for the players in such areas as pensions, life and
disability insurance, health care, minimum salary, arbitration of grievances,
expense allowances, maximum permissible salary cut, termination pay, repre-
sentation at individual salary negotiations, negotiation of rule changes affect-
ing player benefits or obligations, due process in player discipline. See Defend-
ant's Feeney Exhibits F. M and N in evidence. Both management and the
Players' Association recognize the reserve system to be a mandatory subject
of collective bargaining. The National Labor Relations Board asserted juris-
diction over organized baseball in December, 1969.
The history of negotiations to date does not appear to us to establish, as
plaintiff appears to contend, that organized baseball refuses to bargain with
regard to the reserve system and will accept no modification of its structure
unless forced to do so by the courts or by Congress. In the first place, several
of the benefits mentioned above are directed at alleviating some of the un-
desirable side effects of the reserve system. Moreover, serious negotiations aimed
at the core of this system are of quite recent origin and the failure to reach a
quick accord should not be seen, in our opinion, as indicating intransigence on
either or both sides.
the testimony of Mr. Kauffman, owner of the Kansas City Royals, fairly reflective of
club owners who appeared before us :
"My niiniher one reason for buying a baseball club was to help Kansas City retain it,
and this was an opportunity for me to return to my community some of the benefits
which I had reaped.
No. 2 would be the pleasure involved in being a major league owner.
No. .3 would be the prestige, and I presume this is approximate.
And No. 4 would be because I felt I could make it profitable over a period of
time. * * *" Tr. 1522.
17 Further, Mr. Greenberg testified on plaintiflf's behalf :
"* * * I think that the players recognize that the club should have some hold on
them and I feel that it should be very simple to negotiate a term or a period of time
in which the player is signed to a club and he has no rights to leave until that period
has expired.
* * * I think it can be done in many, many ways and the game would continue to
function and operate and the players would be probably more satisfied and I think
it would be best for all interests concerned." Tr. 247. 248.
In this same vein. Mr. Veeck. a former club owner long associated with baseball
called by plaintiff as a rebuttal witness, asserted :
"* * * I don't believe that most athletes want anything but a change, a small
change, a step in a direction. * * *" Tr. 1976.
Finally, cross-examination of plaintiff elicited :
"Q And if Mr. Miller succeeded in inducing the clubs to modify the reserve clause,
would you drop this lawsuit?
A [Flood] Yes, I would."
Tr. 116.
55
While it is true the owners have continued to support the status quo of the
reserve system and have been critical of the various proposals by the Players'
Association for its elimination or modification, they have not closed the door
entirely on various suggestions made during negotiations in the immediate past
in efforts to ameliorate the objectionable features of the reserve clause. Indeed,
Commissioner Kuhn in his testimony at this trial indicated that, "changes
that could be made are changes that are best bargained out between parties
that are involved here * * *" And representatives of the club owners expressed
substanitially similar views.^^
In such matters as labor relations and family disputes, to name just two,
Congress (in the case of collective bargaining) and the courts have determined
that such disputes as do arise therein are best resolved by the parties without
outside interference and that resort to a court-imposed solution should be a
matter of last resort. This is almost invariably the case whenever two parties
must continue to work together amicably toward a common end after the
dispute is settled. This is not to hold that the court should adopt a similar
hands-ofC approach toward this case. Nevertheless, we believe that here, as
well, the parties themselves are best able to reach a satisfactory accord, and
that all avenues toward such an approach certainly have not yet been fully
exhausted.
From the trial record and the sense of fair play demonstrated in the mam
by the witnesses on both sides, we are convinced that the reserve clause can
be fashioned so as to find acceptance by player and club.
IS In AnguRt. 1967 the Players' Association inchided within its Statement of Policy,
containing various proposals for discussion with the club owners, a pas.sage broadly
stating that the reserve system is of doubtful legality and calling for a reasoned,
open-minded approach tow;\rd some accommodation. Defendants' Feeney Exhibit O,
pp. 5-fi. The first Basic Aarreement between the clubs and the Players' Association
executed on Februarv 19. 1968 provided for a joint study of the reserve system during
the two vear term of the agreement. Defendants' Feeney Exhibit F, Article \ III. At
least four meetings were held at which ideas were discussed but no specific proposals
made. Tr. 1.59.^^94, 1918. No joint report issued, but the Players' Association prepared
a written critique of the reserve system on June 27, 1969. Defendants' Feeney Exhibit Q
in evidence. „ . ,
On August 29. 1969, the Players' Association submitted proposals for various changes
in the Basic Agreement. With "respect to the reserve system, its very general proposal
sought onlv "alternative provisions" which would be legal, reasonable, and responsive
to the legitimate interests of players and club owners. Defpndants' Feeney Exhibit P.
pp. 1-2. On October 31, 1969. the Plavers' Association made, apparently for the first
time, a specific proposal in the nature of a binding offer for change in the reserve
system. Defendants' Feeney Exhibit R in evidence. This proposal for free agency statu.s
for plavers every three vears with the original club retaining a right of first refusal
was rejected by "the club's in December. 1969. Tr. 1607. Thereafter, other modifications
suggested by the players including the National Football League option clause were
discussed. 'The club owners continued to talje a bargaining position in support of the
status quo. Discussions continued on all aspects of the new agreement including the
reserve system until Februarv 19, 1970 when the Players Association and the clubs,
with the" final termination date of the old agreement drawing near, stipulated that
neither party would be required to bargain on the reserve system until the instant
lawsuit is finallv adjudicated or discontinued. Defendants' Feeney Exhibit N, Attach-
ment B in evidence. This is the posture in which matters still stand. While defendants
continued to support the status quo and to criticize the modifications suggested by
plaintiff at trial, they also reflected a readiness to continue to negotiate toward an
accommodation. Commissioner Kuhn testified : . j *
"Obviouslv the changes that could be made are changes that are best bargained out
between p.irties that are involved here, such as the clubs and the players. * * *
There have been many changes in the workings of the waiver rule, changes in the
workings of the option provision, changes in the workings of the minimum salary pro-
visions and so forth. 4. v.
The reserve system has been an evolving system, and I expect it to continue to be
an evolving system." Tr. 806.
Air. Feenev, President of the National League, affirmed the following :
"Q Now, Mr. Greenberg testified that, 'the reason for my being here. Judge, is that
I think this has to be worked out between the owners and the players."
Wouldn't vou agree with Mr. Greenberg on that point?
A [Feeney] Yes. I would." Tr. 985.
American League President Joseph Cronin noted : ■, j. .^
••* * * one of the things [the late owner of the Wa-shington Senators] taught me
was to always keep negotiations going. * * * Never say take it or leave it. Always
say 'might consider,' and that is the practice I have maintained throughout my years
in baseball." Tr. 1192. ^ ^ «, ^. , t,
Mr Gaherin chief negotiator for the club owners, responded affirmatively when
asked if "the clubs recognize that the reserve system is a mandatory subject of bar-
gaining upon which the clubs are legally obligated to bargain with the [Players ]
Association." Tr. 1579. Further on he opined : ^ . ...
"* * * we certainly have all of the ability in the two sides to sit down and in the
free area of collective bargaining resolve a matter of this nature.
And I may say parenthetically, if I may, Judge, we are quite willing to do so.
Tr. 1616.
Far more complicated matters accompanied by an exclusive self-centered
concern and by seemingly hostile and irreconcilable attitudes, frequently find
their way to amicable adjustment and the abandonment of court claims. Why
not here — with the parties positive and reasonable men who are equally watch-
ful over a common objective, the best interests of baseball?
CONCLUSION
For the first time in almost fifty years opponents and proponents of the base-
ball reserve system have had to make their case on the merits and support it
with proof in a court of law. As a long line of litigation and congressional
inquiry attests, this system has often been a center of controversy and a source
of friction between player and club. Existing and, as we see it, controlling law
renders unnecessary any determination as to the fairness or reasonableness of
this reserve system.^^ We are bound by the law as we find it and by our obliga-
tion to "call it as we see it."
Although a resolution of the merits of the reserve system would be inappro-
priate at this time, it is nevertheless our hope that by obtaining a complete
record covering not only the threshold question of whether plaintiff states a
cause of action, but the merits of his claims as well, we may have obviated
the possibility of piecemeal determinations and consequent deiay.
The foregoing opinion constitutes this Court's findings of fact and conclusions
of law pursuant to Rule 52(a), F.R.Civ.P.
For tlie reasons already set forth, the Clerk is directed to enter judgment in
favor of defendants and against plaintiff on each cause of action herein.
So ordered.
Supreme Court of the United States
Syllabus
Flood v. Kuhn et al.
certiorari to the united states court of appeals for the second circuit
No. 71-32. Argued IMarch 20, 1972— Decided June 19, 1972
Petitioner, a professional baseball player "traded" to another club without his
previous knowledge or consent, brought this antitrust suit after being refused the
right to make his own contract with another major league team, which is not per-
mitted under the reserve system. The District Court rendered judgment in favor
of respondents, and the Court of Appeals affirmed. Held : The long-standing
exemption of professional baseball from the antitrust laws, Federal BaseiaU
Club V. National League. 259 U.S. 200 (1922) ; TooUon v. New York Yankees. Inc.
346 U.S. 356 (1953), is an established aberration, in the light of the Court's hold-
ing that other interstate professional sports are not similarly exempt, but one in
which Congress has acquiesced, and that is entitled to the benefit of stare decisis.
Removal of the resultant inconsistency at this late date is a matter for legisla-
tive, not judicial, resolution. Pp. 11-27. 443 F. 2d 204, atfirmed.
Blackmun, J., delivered the opinion of the Court, in which Stewart and
Rehnquist. .TJ., joined, and in Parts II, III, and IV of which Burger, C. J., filed
a concurring opinion. Douglas and Marshall, J.T.. Sled dissenting opinions, in
which Brennan, J., joined. Powell, J., took no part in the consideration or deci-
sion of the case.
CNotice : This opinion is siib.lect to formal revision before publication in the preliminary
print of the United States Reports. Readers are requested to notify tlie Reporter of Deci-
sions. Supreme Court of the United States. Washinfrton, D.C. 2054.3, of any typoi^raphical
or other formal errors, in order that corrections may be made before the preliminary print
goes to press.)
19 Admission into evidence of plaintiff's exhibits 28. 29 and .34 for identification is
contested. Since we do not reach the merits of the reserve system, resolution of their
admissibility is unnecess.ry. A'^'-inning arguendo that such '■xhibits were in evidence,,
our decision herein would be unaffected.
57
SuPEEME Court of the United States
No. 71-32
CuBTis C. Flood, petitioner
V.
Bowie K. Kuhn el al.
On Writ of Certiorari to the United States Court of Appeals for the Second Circuit
[June 19, 1972]
Mr. Justice Blackmum delivered the opinion of the Court.
For the third time in 50 years the Court is asked specifically to rule that pro-
fessional baseball's reserve system is within the reach of the federal antitrust
laws \ Collateral issues of state law and of federal labor policy are also advanced.
1 The reserve system, publicly introduced into baseball contracts in 1887, see Metro-
politan Exhibition Co. v. Swing, 42 F. 198, 202-204 (C. Ct. SDNY 1890), centers in the
uniformity of player contracts ; the confinement of the player to the club which has him
under the" contract ; the assignability of the player's contract ; and the ability of the club
annually to renew the contract unilaterally, subject to a stated salary minimum. Thus
A. Rule 3 of the Major League Rules provides in part :
"(a) Uniform contract. To preserve morale and to produce the similarity of conditions
necessary to keen competition, the contracts between all clubs and their players in the
Major Leagues shall be in a single form which shall be prescribed by the Major League
Executive Council. No club shall make a contract different from the uniform contract or a
contract containing a non-reserve clause, except with the written approval of the Commis-
sioner.
"(g) Tampering. To preserve discipline and competition, and to prevent the enticement
■of players, coaches, managers and umpires, there shall be no negotiations or dealings re-
specting employment, either present or prospective, between any player, coach or manager
and any club other than the club with which he is under contract or acceptance of terms,
or by which he is reserved, or which has the player on its Negotiation List, or between
any umpire and any league other than the league with which he is under contract or ac-
ceptance of terms, unless the club or league with which he is connected shall have, in
writing, expressly authorized such negotiations or dealings prior to their commencement."
B. Rule 9 of tlie Major League Rules provides in part : . , , rr,,
"(a) Notice A club may assign to another club an existing contract with a player. The
player, upon receipt of written notice of such assignment, is by his contract bound to serve
the assignee.
*****
"After the date of such assignment all rights and obligations of the assignor clubs there-
under shall become the rights and obligations of the assignee club ...•'. „ , ^
C. Rules .3 and 9 of the Professional Baseball Rules contain provisions parallel to
those just quoted. . , .
D. The Uniform Plaver's Contract provides in part : . , ^, , , ,, ,
"4 (a) The Player agrees that, in addition to other remedies, the Club snail be
entitled to' injunctive and other equitable relief to prevent a breach of this contract by
the Player, including, among others, the right to enjoin the Player from playing baseball
for any "other person or organization during the term of this contract.
"5 (a) The Player agrees that, while under contract, and prior to expiration of the
Clnbs right to renew this contract, he will not play baseball otherwise than for the Club,
except that the Player may participate in post-season games under the conditions pre-
scribed in the Major "League Rules. ... . ^ v, ^i, ,.i ,, / i
"6 (a) The Player agrees that this contract may be assigned by the >-.lub Unrl re-
assigned by any as"signee Club) to any other Club in accordance with the Major League
Rules and the Professional Baseball Rules. .
"10 (a) On or before Januarv 15 (or if a Sunday, then the next preceding business
dav) of the year next follovring the la^t pla.ving season covered by this contract, the
niib mav ten"der to the Plaver a contract for the term of that year by mailing the same
to the Player at his address following his signature hereto, or if none be given, then
at his last "address of record with the Club. If prior to the March 1 next succeeding said
.January 15, the Plaver and the Club have not agreed upon the terms of such contract,
then on or before 10 davs after said March 1. the Club shall have the right by written
notice to the Player at said address to renew this contract for the period of one year on
the same terms, except that the amount payable to the Player shall be such as the club
shall fix in said notice : provided, however, that said amount, if fixed by a Major League
Club, shall be an amount payable at a rate not less than 80% of the rate stipulated for
the preceding year.
"(b) The Club's right to renew this contract, as provided in subparagraph (a) of this
paragraph 10, and the promise of the Player not to play otherwise than with the Uub
have been taken into consideration in determining the amount payable under paragraph
2 hereof."
58
THE GAME
It is a century and a quarter since the New York Nine defeated tlie Knicker-
bockers 23-to-l on Hoboken's Elysian Fields June 19, 1846, with Alexander Jay
Cartwright as the instigator and the umpire. The teams were amateiu% but the
contest marked a signiticant date in baseball's beginnings. That early game led
ultimately to the development of professional baseball and its tightly organized
structure.
The Cincinnati Red Stockings came into existence in 1869 upon an outpouring;
of local pride. With only one Cincinnatian on the payroll, this professional teani
traveled over 11,000 miles that summer, winning .56 games and tying one. Shortlj^
thereafter, on St. Patrick's Day in 1871, the National Association of Professional
Baseball Players was founded and the professional league was born.
The ensuing colorful days are well know^n. The ardent follower and the student
of baseball know of General Abner Doubleday ; the formation of the National
League in 1876; Chicago's supremacy in the first year's competition under the
leadership of Al Spalding and with Cap Anson at third base ; the formation of
the American Association and then of the Union Association in the 1880's ; the
introduction of Sunday baseball ; interleague warfare with cut-rate admission
prices and player raiding; the development of the reserve "clause"; the emer-
gence in 188.5 of the Brotherhood of Professional Ball Players, and in 1890 of
the Players League; the appearance of the American League, or "junior circuit,"
in 1901, rising from the minor Western Association ; the first World Series in
1903, disruption in 1904, and the Series' re.sumption in 1905; the short-lived
Federal League on the majors' scene during World War I years ; the troublesome
and discouraging episode of the 1919 Series ; the home run ball ; the shifting of
franchises ; the expansion of the leagues ; the installation in 1965 of the major
lea.gue draft of potential new players ; and the formation of the Major League
Baseball Players Association in 1966.''
Then there are the many names, celebrated for one reason or another, that
have sparked the diamond and its environs and that have provided tinder for
recaptured thrills, for reminiscence and comparisons, and for conversation and
anticipation in-season and off-season ; Ty Cobb, Babe Ruth, Tris Speaker, Walter
Johnson, Henry Chadwick, Eddie Collins, Lou Gehrig, Grover Cleveland Alex-
ander, Rogers Hornsby, Harry Hooper, Goose Gosiin, Jackie Robinson, Honus
Wagner, Joe McCarthy, Johii McGraw, Deacon Phillippe, Rube Marquard,
Christy Mathewson. Tommy Leach, Big Ed Delahanty, Davy Jones, Germany
Schaefei-, King Kelly, Big Dan Brouthers, Wahoo Sam Crawford, Wee Willie
Keeler, Big E^d Walsh, Jimmy Austin, Fred Snodgrass, Satchel Paige, Hugh
Jennings, Fred Merkle. Iron Man McGinnity, Three-Finger Brown, Harry and
Stan Coveleski, Connie Mack, Al Bridwell, Red RuflSng, Amos Rusie, Cy Young,
Smokey Joe Wood, Chief Meyers, Chief Bender, Bill Klem. Hans Lobert, Johnny
Evers Joe Tinker, Roy Campanella, Miller Huggins, Rube Bressler, Dazzy Vance,
Edd Rousch, Bill Wambsganss, Clark Griffith, Branch Rickey, Frank Chance,
Cap Anson, Nap Lajoie, Sad Sam Jones, Bob O'Farrell. Lefty O'Doul, Bobby
Veach, Willie Kamm, Heinie Groh, Lloyd and Paul Waner, Stuffy Mclnnis,
Charles Comiskev, Roger Bresnahan, Bill Dickey, Zach Wheat. George Sisler,
Charlie Gehringer, Eppa Rixev, Harry Heilmann, Fred Clarke, Dizzy Dean,
Hank Greenberg, Pie Traynor, Rube Waddell, Bill Terry, Carl Hubbell, Old Hoss
to Ring Lardner, Sr. ; Ernest 1j. Thayer s "uasey at rue sym ; me nug of
'Tinker to Evers to Chance" ; ^ and all the other happenings, habits, and super-
-See generally The Baseball Bncvclopeflia (1969) : L. Ritter. The Glory of Their Times
(1966) : H. Sevmonr, Baseball, Vol. I (1960) and Vol. II (1971) ; D. Voigt, American
Baseball. Vol. I'(1966) and Vol. II (1970). ., .. ,^
3 These are names only from earlier years. By mentioning some, one risks unintended
omission of others equally celebrated. , , , ^^ ^ , ■. ^
* Millions have known and enjoyed baseball. One writer knowledgeable in the field of
sports almost assumed that everyone did until, one day, he discovered otherwise :
"I knew a cove who'd never heard of Washington and Lee,
Of Caesar and Napoleon from the ancient jamboree,
But, bli'me, there are queerer things than anything like that,
For here's a cove who never heard of 'Casey at the Bat' !
"Ten million never heard of Keats, or Shelley, Burns, or Poe :
But they know 'the air was shattered by the force of Casey's blow ;
They never heard of Shakespeare, nor of Dickens, like as not,
59
stitions about and around baseball that made it the "national pastime" or,
depending upon the point of view, "the great American tragedy." *
II
THE PETITIONER
The petitioner, Curtis Charles Flood, born in 1938, began his major league
career in 1956 when he signed a contract with the Cincinnati Reds for a salary
of $4,000 for the season. He had no attorney or agent to advise him on that
occasion. He was traded to the St. Louis Cardinals before the 195S season. Flood
rose to fame as a center fielder with the Cardinals during the years 1958-1969.
In those 12 seasons he compiled a batting average of .293. His best offensive
season was 1967 when he achieved .335. He was .301 or better in six of the 12
St. Louis years. He participated in the 1964, 1967, and 1968 World Series. Lie
played errorless ball in the field in 1966, and once enjoyed 223 consecutive
errorless games. Flood has received seven Golden Glove Awards. He was co-
captain of his team from 1965-1969. He ranlvs among the 10 major league out-
fielders possessing the highest lifetime fielding averages.
Flood's St. Louis compensation was :
1961 $13,500 ( including bonus for signing)
1962 $16,000
1963 $17,500
1964 $23,000
1965 $35,000
1966 $45,000
1967 $50,000
1968 $72,500
1969 $90,000
These figures do not include any so-called fringe benefits or World Series shares.
But at the age of 31, in October 1969, Flood was traded to the Philadelphia
Phillies of the National League in a multi-player transaction. He was not con-
sulted about the trade. He was infoi-med by telephone and received formal notice
only after the deal had been consummated. In December he complained to the
Commissioner of Baseball and asked that he be made a free agent and be placed
at liberty to strike his own bargain with any other major league team. His re-
quest was denied.
Flood then instituted this antitrust suit "^ in January 1970 in federal court for
the Southern District of New York. The defendants (although not all were
named in each cause of action) were the Commissioner of Baseball, the presidents
of the two major leagues, and the 24 major league clubs. In general, the complaint
charged violations of the federal antitrust laws and civil rights statutes, viola-
tion of state statutes and the common law, and the imposition of a form of
peonage and involuntarv servitude contrary to the Thirteenth Amendment and
42 U.S.C. § 1994, 18 U.S.C. § 1581, and 29 U.S.C. §§ 102 and 103. Petitioner sought
declaratory and injunctive relief and treble damages.
Flood declined to play for Philadelphia in 1970, despite a $100,000 salary offer,
and he sat out the year. Alter the season was concluded, Philadelphia sold its
rights to Flood to the Washington Senators. Washington and the petitioner were
able to come to terms for 1971 at a salary of $110,000." Flood started the season
But they know the somber drama from old Mudville's haunted lot.
"He never heard of Casey ! Am I dreaming? Is it true?
Is fame but wind-blown ashes when the summer day is through i
Does greatness fade so quickly and is grandeur doomed to die
That bloomed in early morning, ere the dusk rides down the sky ?
"He Never Heard of Casey," Grantland Rice, The Sportlight, New York Herald Tribune,
June 1, 1926. p. 23.
B Franklin Pierce Adams, Baseball's iSad Lexicon :
"These are the saddest of possible words,
'Tinker to Evers to Chance'
Trio of bear cubs, and fleeter than birds,
'Tinker to Evers to Chance'
Ruthlessly pricking our gonfalon bubble,
Making" a Giant hit into a double.
Words that are weighty with nothing but trouble :
'Tinker to Evers to Chance.' "
« George Bernard Shaw The Sporting News. May 27, 194.3. . ,.,, i >
■7 Concededly supported by the Major League Baseball Players Association, the players
collective-bargaining representative. Tr. of Oral Arg. 12. ■4.i,„„4.
sThe parties agreed that Flood's participating in baseball m 1971 would be without
prejudice to his case.
60
but, apparently because he was dissatisfied with his performance, he left the
Washington club on April 27, early in the campaign. He has not played baseball
since then.
Ill
THE PRESENT LITIGATION
Judge Cooper, in a detailed opinion, first denied a preliminary injunction, 307
F. Supp. 793 (SDNY 1970) , observing on the way.
"Baseball has been the national pastime for over one hundred years and
enjoys a unique place in our American heritage. Major league professional
baseball is avidly followed by millions of fans looked upon with fervor and
pride and provides a special source of inspiration and competitive team spirit
especially for the young. . ^, ^ ..
"Baseball's status in the life of the nation is so pervasive that it would
not strain credulity to say the Court can take judicial notice that baseball is
everybody's business. To put it mildly and with restraint, it would be un-
fortunate indeed if a fine sport and profession, which brings surcease from
daily travail and an escape from the ordinary to most inhabitants of this
land were to suffer in the least because of undue concentration by any one
or any group on commercial and profit considerations. The game is_on higher
ground ; it behooves every one to keep it there." 307 F. Supp., at 797.
Flood's aTjplication for an early trial was granted. The court next deferred until
trial its decision on the defendants' motions to dismiss the primary causes of
action but granted a defense motion for summary judgment on an additional
cause 'of action, 312 F. Supp. 4(H (SDNY 1970).
Trial to the court took place in May and June 1970. An extensive record was
developed. In an ensuing opinion, 316 F. Supp. 271 (SDNY 1970), Judge Cooper
first noted that : , , ^ j, ^ ^„
"Plaintiff's witnesses in the main concede that some form Oj. reserve on
players is a necessary element of the organization of baseball as a league
sport, but contend that the present all-embracing system is needlessly restric-
tive and offer various alternatives which in their view might loosen the bonds
without sacrifice to the game. ... ,. . ^. *
"Clearly the preponderance of credible proof does not favor elimination ol
the reserve clause. With the sole exception of plaintiff himself, it shows that
even plaintiff's witnesses do not contend that it is wholly undesirable; in
fact they regard substantial portions meritorious. . . ." 310 F. Supp., at 275-
276.
He then held that Frderal Baseball v. National League, 259 U.S. 200 (1922),
and Toolson v. Neiv York Yankees, Inc., 346 U.S. 356 (1953), were controlling;
that it was not necessary to reach the issue whether exemption from the antitrust
laws would result because aspects of baseball now are a subject of collective
bargaining ; that the plaintift"s state law claims, those based on common law as
well as on statute, were to be denied because baseball was not "a matter which
admits of diversity of treatment," 316 F. Supp., at 280; that the involuntary
servitude claim failed becau.se of the absence of "the essential element of this
cause of action, a showing of compulsory service," 316 F. Supp., at 281-282 ; and
that judgment was to be entered for the defendants. Judge Cooper included a
statement of personal conviction to the effect that "negotiations could produce an
accommodation on the reserve system which would be eminently fair and equitable
to all concerned" and that "the reserve clause can be fashioned so as to find
acceptance by plaver and club." 316 F. Supp., at 282 and 284.
On appeal, the Second Circuit felt "compelled to affirm." 443 F. 2d 264, 265
(1971). It regarded the issue of state law as one of first impres.sion, but con-
cluded that the Commerce Clause precluded its application. Judge Moore added
a concurring opinion in which he predicted, with respect to tlie suggested over-
ruling of Federal Basehall and Toolson, that "there is no likelihood that such an
event will occur." « 443 F. 2d 268, 272.
9 " . And properly so. Baseball's welfare and future should not be for politirally in-
sulated interpreters of technical antitrust statutes but rather should be for the voters
through their elected representatives. If baseball is to be damaged by statutory regulation,
let the congressman face his constituents the next November and also face the conse-
quences of his baseball voting record." 443 F. 2d, at 272. „■, ,^no ^r^f^K
Cf. Judge Friendly's comments in fialenio v. Amencan Leaque, 429 F. 2d 1003, 1005
(C\ 2 1970) cert denied, suh nom. Salerno v. Kuhn, 400 U.S. 1001 (1970) :
" We freely acknowledge our belief that Federal Baseball was not one of Mr. Justice
Holmes' happies't days, that the rationale of Toolson is extremely dubious and that, to
(Footnote 9 continued on p. 61.)
ei
We granted certiorari in order to look once again at tliis troublesome and un-
usual situation. 404 U.S. 880 ( 1971 ) .
THE LEGAL BACKGROUND
A. Federal BasehaHl Cluh v. National League, 259 U.S. 200 (1922), was a suit
for treble damages instituted by a member of the Federal League (Baltimore)
against the National and American Leagues and others. The plaintiff obtained a
verdict in the trial court, but the Covirt of Appeals reversed. The main brief filed
by the plaintiff" with this Court discloses that it was strenuously argued, among
other things, that the business in which the defendants were engaged was inter-
state commerce ; that the interstate relationship among the several clubs, located
as they were in different States, was predominant ; that organized baseball
represented an investment of colossal wealth ; that it was an engagement in
moneymaking ; that gate receipts were divided by agreement between the home
club and the visiting club ; and that the business of baseball was to be distin-
guished from the mere playing of the game as a sport for physical exercise and
diversion. See also 259 U.S., at 201-206.
Mr. Justice Holmes, in speaking succinctly for a unanimous Court, said :
"The business is giving exhibitions of baseball whch are purely state af-
fairs. . . . But the fact that in order to give the exhibitions the Leagues must
induce free persons to cross state lines and must arrange and pay for their
doing so is not enough to change the character of the business. . . . [T]he
transport is a mere incident, not the essential thing. That to which it is inci-
dent, the exhibition, although made for money would not be called trade or
commerce in the commonly accepted use of those words. As it is put by the
defendants, personal effort, not related to production, is not a subject of
commerce. That which in its consummation is not commerce does not be-
come commerce among the States because the transportation that we have
mentioned takes place. To repeat the illustrations given by the Court below,
a firm of lawyers sending out a member to argue a case, or the Chautaqua
lecture bureau sending out lecturers, does not engage in such commerce be-
cause the lawyer or lecturer goes to another State.
"If we are right the plaintiff's business is to be described in the same way
and the restrictions by contract that prevented the plaintiff from getting
players to break their bargains and the other conduct charged against the de-
fendants were not an interference with commerce among the States." 259
U.S., at 208-209.10
The Court thus chose not to be persuaded by opposing examples proffered by
the plantiff, among them (a) Judge Learned Hand's decision on a demurrer to
a Sherman Act complaint with respect to vaudeville entertainers traveling a
theater circuit covering several States, H. B. MarienelU, Ltd. v. United Booking
Offices 227 F. 165 (SDNY 1914) ; (b) the first Mr. Justice Harlan's opinion in
International Textbook Co. v. Pigg, 217 U.S. 91 (1910), to the effect that corre-
spondence courses pursued through the mail constituted commerce among the
States; and (c) Mr. Justice Holmes' own opinion, for another unanimous Court,
on demurrer in a Sherman Act case, relating to cattle shipment, the interstate
movement of which was interrupted for the finding of purchasers at the stock-
yards. Swift & Co. V. United States, 196 U.S. 375 (1905). The only earlier case
the parties were able to locate where the question was raised whether organized
baseball was within the Sherman Act was American League BaseMll Club v.
Chase, 149 N.Y.S. 6. 86 Misc. 441 (Sup. Ct. 1914). That court had answered the
question in the negative.
protective canopy spread over it by the United States Supreme Court s decision in the Balti-
more Federal League anti-trust suit against Organized Baseball in 1922 In it .T>is) ce
Holmes speaking for a unanimous court, ruled that the business of giving baseball exhibi-
tions for profit was not 'trade or commerce in the commonly-accepted use of those words
because 'personal effort, not related to production, Is not a subject of commerce ; nor was
it interstate because the movement of ball clubs across state lines was merely incidental
to the business. It should be noted that, contrary to what many believe, Holmes did call
baseball a business ; time and again those who have not troubled to read the text of the
decision have claimed incorrectly that the court said baseball was a sport and not a busi-
ness." 2 H. Seymour, Baseball 420 (1971).
78-465— 72— pt. 1 5
62
B. Federal Baseball was cited a year later, and without disfavor, in another
opinion by Mr. Justice Holmes for a unanimous Court. The complaint charged
antitrust violations with respect to vaudeville bookings. It was held, however,
that the claim was not frivolous and that the bill should not have been dismissed.
Hart v. B. F. Keith Vaudeville Exchange, 262 U.S. 271 (1923).''
It has also been cited, not unfavorably, with respect to the practice of law,
United States v. South-Eastern Underwriters Association, 322 U.S. 533, (1944)
(Stone, C.J., dissenting) ; with respect to out-of-state contractors, United States
v. Employing Plasterers Association, 347 U.S. 186, 196-197 (1954) (Minton, J.,
dissenting) ; and upon a general comparison reference, ^^orth American Company
V. Securities d Exchange Commission. 327 U.S. 686, 694 (1946) .
In the years that followed, baseball continued to be subject to intermittent anti-
trust attack. The courts, however, rejected these challenges on the authority
of Federal Baseball. In some cases stress was laid, although unsuccessfully, on
new factors such as the development of radio and television with their substan-
tial additional revenues to baseball.'' For the most part, however, the Holmes
opinion was generally and necessarily accepted as controlling authority.'' And
in the 1952 Report of the Subcommittee on Study of Monopoly Power of the
House Committee on the Judiciary, H.R. Rep. No. 2002, 82d Cong., 2d Sess.,
p. 229, it was said, in conclusion :
"On the other hand the overwhelming preponderance of the evidence estab-
lished baseball's need for some sort of reserve clause. Baseball's history
shows that chaotic conditions prevailed when there was no reserve clause.
Experience points to no feasible substitute to protect the integrity of the
game or to guarantee a comparatively even competitive struggle. The evi-
dence adduced at the hearings would clearly not justify the enactment of
legislation flatly condemning the reserve clause."
C. The Court granted certiorari, 345 U.S. 963 (1953), in the Toolson, Koivalski,
and Corbett cases, cited in footnotes 11 and 12, supra, and, by a short per curiam
(Chief Justice Warren and Justices Black, Frankfurter, Douglas, Jackson.
Chirk, and Minton), aflirmed the judgments of the respective courts of appeals
in those three cases. Toolson v. New York Yaukecf:. Inc.. 346 U.S. 356 (1953).
Federal Baseball was cited as holding "that the business of providing public base-
ball games for profit between clubs of professional baseball players was not within
the scope of the federal antitrust laws." 346 U.S., at 357. and :
"Congress has had the ruling under consideration but has not seen fit to
bring such business under these laws by legislation having prospective effect.
The business has thus been left for thirty years to develop, on the under-
standing that it was not subject to existing antitrust legislation. The present
cases ask us to overrule the prior decision and, with retrospective effect, hold
the legislation applicable. We think that if there are evils in this field which
now warrant application to it of the antitrust laws it should be by legislation.
Without re-examination of the underlying issues, the judgments below are
affirmed on the authority of Federal Baseball Club of Baltimore v. National
League of Professional Baseball Clnbs, supra, so far as that decision deter-
mines that Congress had no intention of including the business of baseball
within the scope of the federal antitrust laws." Ibid.
This quotation reveals four reasons for the Court's aflirmance of Toolson and
its companion cases: (a) Congressional awareness for three decades of the
Court's ruling in Federal Baseball, coupled with congressional inaction, (b) The
fact that baseball was left alone to develop for that period upon the understand-
ing that the reserve system was not subject to existing federal antitrust laws,
(c) A reluctance to overrule Federal Baseball with consequent retroactive effect.
■>' On remand of thp Hart casp the trial court dismissed tlie complaint at the close of the
evidence. The Second Circuit affirmed on the ground that the plaintiff's evidence failed to
establish that the Interstate transportation was more than incidental. 12 F. 2d .341 (1926).
This court denied certiorari, 273 U.S. 703 (1926).
-^TooJxon V. Neir York Yankeef!, Inc., 101 F. Supp. 93 (SD Cal. 1951). aff'd. 200 F. 2d
198 (CA9 19.52) : Koval.<'ki v. Chandler. 202 F. 2d 413 (CAB 1953). See S!alerno v. Aittrr-
ican Leapue, 429 F. 2d 1003 (rA2 1970). cert, denied, siib nom. Salerno v. Kuhn, 400 U.S.
1001 (1971). But cf. Gordclla v. Chandler. 172 F. 2d 402 (CA2 1949) (this case, we are
advised, was subsequentlv settled) ; Martin v. National League Basel>all Club, 174 F. 2d
917 fCA2 1949). ^, ^ ^
'^^ Corbett v. Chandler, 202 F. 2d 42S (TAB 1953): Portland Baseball Club. Inc. v.
Baltimore Baseball Club. Inc., 282 F. 2d 680 (CA9 1960) ; memiec v. Seattle Rainier
Baseball Club, Inc.. 67 F. Supp. 705 fWD Wash. 1946). See Wiscon.^in v. Mihimvkee
Braves, Inc., 31 Wis. 2d 699, 144 N. W. 2d 1 (1966), cert, denied, 385 U.S. 990 (1966).
63
( d ) A professed desire that any needed remedy be provided by legislation rather
than by court decree. The emphasis in Toolson was on the determination, attrib-
uted even to Federal Baseball, that Congress liad no intention to include baseball
within the reach of the federal antitrust laws. Two Justices (Burton and Reed.
JJ. ) dissented, stressing the factual aspects, revenue sources, and the absence of
an express exemption of organized baseball from the Sherman Act. 34G U.S., at
3.j7. The 1952 congressional study was mentioned. Id., at 358, 359, 361.
It is of interest to note that in Toolson the petitioner had argued flatly tbat
Federal Baseball "is wrong and must be overruled," Brief 19, and that Thomas
Reed Powell, a constitutional scholar of no small stature, urged, as counsel for
an amicus, that "baseball is a unique enterprise," Amicus Brief 2, and that "un-
bridled competition as applied to baseball would not be in the public interest."
Id., 14.
D. United States v. Shubert, 348 U.S. 222 (1955), was a civil antitrust action
against defendants engaged in the production of legitimate theatrical attrac-
tions throughout the United States and in operating theaters for the presentation
of such attractions. The District Court had dismissed the complaint on the author-
ity of Federal Baseball and Toolson. 120 F. Supp. 15 (SDNY 1953). This Court
reversed. Mr. Chief Justice Warren noted the Court's broad conception of
"trade or commerce" in the antitrust statutes and the types of enterprises al-
ready held to be within the reach of that phrase. He stated that Federal Baseball
and Toolson afforded no basis for a conclusion that businesses built around the
performance of local exhibititms are exempt from the antitrust lav.s. 348 U.S..
at 227. He then went on to elucidate the holding in Toolson by meticulously
.spelling out the factors mentioned above :
"In Federal Baseball, the Court, speaking through Mr. Justice Holmes,
was dealing with the business of baseball and nothing else. . . . The travel,
the Court concluded, was 'a mere incident, not the essential thing.'
"In Toolson, where the issue was the same as in Federal Baseball, the
Court was confronted with a unique combination of circumstances. For over
30 years there had stood a decision of this Court specifically fixing the
status of the baseball business under the antitrust laws and more par-
ticularly the validity of the so-called 'reserve clause.' During this period,
in reliance on the Federal Baseball precedent, the baseball business had
grown and developed. . . . And Congress, although it had actively considered
the ruling, had not seen fit to reject it by amendatory legislation. Against
this background, the Court in Toolson was asked to overrule Federal Base-
ball on the ground that it was out of step with subsequent decisions re-
flecting present-day concepts of interstate commerce. The Court, in view of
the circumstances of the case, declined to do so. But neither did the Court
necessarily reaffirm all that was said in Federal Baseball. Instead, '[w]ithout
re-examination of the underlying issues,' the Court adhered to Federal Base-
ball 'so far as that decision determines that Congress had no intention of
including the business of baseball within the scope of the federal antitrust
laws.' 346 U.S., at 357. In short, Toolson was a narrow application of the
rule of stare decisis.
". . . If the Toolson holding is to be expanded — or contracted — the appro-
priate remedy lies with Congress." 348 U.S. 228-230.
E. United States v. International Boxing Club. 348 U.S. 236 (1955), was a
companion to Shubert and was decided the .same day. This was a civil antitrust
action against defendants engaged in the business of promoting professional
championship boxing contests. Here again the District Court had dismissed the
complaint in reliance upon Federal Baseball and Toolson. The Chief Justice ob-
served that "if it were not for Federal Baseball and Toolson, we think that it
would be too clear for dispute that the Government's allegations brings the de-
fendants within the scope of the Act." 348 U.S., at 240-241. He pointed out that
the defendants relied on the two baseball cases but also would have been content
with a more restrictive interpretation of them than the Shubert defendants, for
the boxing defendants argued that the cases immunized only businesses that in-
volve exhibitions of an athletic nature. The Court accepted neither argument. It
again noted, 348 U.S., at 242, that "Toolson neither overruled Federal Baseball
nor necessarily reaffirmed all that was said in Federal Baseball." It stated :
64
". . . The controlling consideration in Federal Basehall and Hart was,
instead, a very practical one — the degree of interstate activity involved in
the particular "business under review. It follows that stare decisis cannot help
the defendants here; for, contrary to their argument, Federal Basehall did
not hold that all businesses based on professional sports were outside the
scope of the antitrust laws. The issue confronting us is, therefore, not
whether a previously granted exemption should continue, but w^hether an
exemption should be'granted in the first instance. And that issue is for Con-
gress to resolve, not this Court.'" 84S U.S., at 243.
The Court noted the presence then in Congress of various bills forbidding the
application of the antitrust laws to "organized professional sports enterprises" ;
the holding of extensive hearings on some of the.se ; subcommittee opposition ; a
I)ostponement recommendation as to baseball : and the fact that "Congress thus
left intact the then-existing coverage of the antitrust laws." 348 U.S., at 243-244.
Mr. Justice Frankfurter, joined by Mr. Justice Minton, dis.sented. "It would
baffle the subtlest ingenuity." he said, "to find a single differentiating factor
between other sporting exhibitions . . . and baseball insofar as the conduct of
the sport is relevant to the criteria or considerations by which the Sherman
Law becomes applicable to a 'trade or commerce.' " 348 U.S., at 248. He went on :
••. . . The Court decided as it did in the Toolson case as an application
of the doctrine of ^stare decisis. That doctrine is not, to be sure, an imprison-
ment of reason. But neither is it a whirasy. It can hardly be that this Court
gave a preferred position to baseball because it is the great American
sport. ... If stare decisis be one aspect of law, as it is, to di.sregard it in
identic situations is mere caprice.
"Congress on the other hand, may yield to sentiment and be capricious,
subject only to due proce.ss. . . .
"Between them, the case and Shuhert illustrate that nice but rational
distinctions are inevitable in adjudication. I agree with the Court's opinion
in Shuhert for precisely the reason that constrains me to dissent in this
case." 348 U.S., at 249-250.
Mr Justice Minton also separately dissented on the ground that boxing is not
trade or commerce. He added the comment that "Congress has not attempted"
to control baseball and boxing. 348 U.S., at 251, 253. The two dissenting Justices,
thus did not call for the overruling of Federal Baseball and Toolson; they
merelv felt that boxing should be under the same umbrella of freedom as was
baseball and, as Mr. Justice Frankfurther said, 348 U.S., at 250, they could not
exempt baseball "to the exclusion of every other .sport different not one legal
jot or tittle from it." " , ^ ,^ „ :r o-.. ^r c
F. The parade marched on. Radovich v. National Football League, 3o2 U.S.
445 (1957), was a civil Clayton Act case testing the application of the antitru.st
laws to professional football. The District Court dismissed. The Ninth Circuit
nffirmed in part on the basis of Federal Baseball and Toolson. The court did
not hesitate to "confess that the strength of the pull" of the baseball cases and
of International Boxing "is about equal," but then observed that "Football is
a team sport" and boxing an individual one. 231 F. 2d 620, 622.
This Court reversed with an opinion by Mr. Justice Clark. He said that the
Court made its ruling in Toolson "because it was concluded that more harm
would be done in overruling Federal Baseball than in upholding a ruling which
at best was of dubious validity." 352 U.S., at 450. He noted that Congress had
not acted. He then said : . ,^ ^ •,,
" . . All this, combined with the flood of litigation that would follow
its repudiation, the harassment that would ensue, and the retroactive effect
of such a decision, led the Court to the practical result that it should sustain
the unequivocal line of authority reaching over many years.
" . . [Sjince Toolson and Federal Baseball are still cited as controlling
authority in antitrust actions involving other fields of business, we now
specifically limit the rule there established to the facts there involved, i.e.,
the business of organized professional baseball. As long as the Congress
continues to acquiesce we should adhere to— but not extend— the interpre-
tation to the Act made in those cases. ... a; • <- ^-
"If this ruling is unrealistic, inconsi.stent, or illogical, it is sufficient to
answer, aside from the distinctions between the businesses, that were we
" The case's final chapter is International Boxing Club v. United States, 358 U.S. 242
(1959).
65
considering the question of baseball for the first time upon a clean slate
we would have no doubts. But Federal Baseball held the business of baseball
outside the scope of the Act. No other business claiming the coverages of
those cases has such an adjudication. We, therefore, conclude that the
orderly way to eliminate error or discrimination, if any there be, is by
legislation and not by court decision. Congressional processes are more
accommodative, affording the whole industry hearings and an opportunity
to assist in the formulation of new legislation. The resulting product is
therefore more likely to protect the industry and the public alike. The whole
scope of congressional action would be known long in advance and effective
dates for the legislation could be set in the future without the injustices
of retroactivity and surprise which might follow court action." 352 U.S.,
at 4.50—452 (footnote omitted) .
Mr. Justice Frankfurter dissented essentially for the reasons stated in his
dissent in Internatirmal Boxing, 3-52 U.S., at 455. Mr. Justice Karlan, joined
by Mr. Justice Brennan, also dissented because he, too, was "unable to dis-
tinguish football from baseball." 352 U.S., at 456. Here again the dissenting
Justices did not call for the overruling of the baseball decisions. They merely
could not distinguish the two sports and, out of respect for stare decisis, voted
to affirm.
G. Finally, in Haywood v. National Baskethall Association, 401 U. S. 1204
(1971), Mr. Justice Douglas, in his capacity as Circuit Justice, reinstated a
District Court's injunction pendente lite in favor of a professional basketball
player and said, "Basketball . . . does not enjoy exemption from the antitrust
laws." 401 U. S., at 1205.''
H. This series of decisions understandably .spawned exten.sive commentary."
some of it mildly critical and much of it not ; nearly all of it looked to Congress
for any remedy that might be deemed essential.
I. Legislative proposals have been numerous and persistent. Since TooUon
more than 50 bills have been introduced in Congress relative to the aplicability
or nonapplicability of the antitrust laws to ba,seball." A few of these pas.sed one
house or the other. Those that did would have expanded, not restricted, the
reserve system's exemption to other professional league sports. And the
Sports Broadcasting Act of September 30, 1961, Pub. L. 87-331, 75 Stat. 732, and
the merger addition thereto effected by the Act of November 8, 1966, Pub. L.
15 See also Denver Rocltets v. All-Pro Manaoement, Inc., 325 F. Supp. 1049, 1060 (CD
Cal. 1971) ; Washinaton Professional Baskethall Corp. v. National Basketiall Association,
147 F. Supp. 154 (Si3NY 1956).
18 J. Neville, Baseball and the Antitrust Laws, 16 Fordham L. Rev. 208 (1947); J.
Kpkler, Baseball — Sport or Commerce?, 17 U. of Chi. L. Rev. 56 (1949) : Mnnopsonv in
Manpovrer : Organized Baseball Meets the Antitrust Laws, 62 Tale L. ,T. 576 (195.3):
P. Gresrory, The Baseball Player. An Economic Study, c. 19 (1956) ; The Super Bowl and
the Sherman Act : Professional Team Sports and the Antitrust Laws, 81 Harv. L. Rev.
418 (1967) ; The Supreme Court, 1953 Term, 68 Ilp.rv. L. Rev. 105, 136-138 (1954) ; The
Supreme Court, 1956 Term. 71 Harv. L. Rev. 94, 170-173 (1957) : Note, 32 Va. L. Rev.
1164 (1946) ; Note, 24 Notre Dame Lawver 372 (1949) : Note, 53 Colum. L. Rev. 242
(1953) : Note, 22 U. of K. C. L. Rev. 173 (1954) : Note, 25 Miss. L. J. 270 (1954) ; Note,
29 N. Y. U. L. Rev. 213 (1954) ; Note, 105 U. of Pa. L. Rev. 110 (1956) : Note, 32 Texas
L. Rev. 890 (1954) ; Note, 35 P.. TT. L. Rev. 447 (1955) ; Note, 57 Colum. L. Rev. 725
(1957) ; Note, 23 G. W. L. Rev. 606 (1955) ; Note, 1 Howard L. J. 281 (1955) : Note, 26
Miss. L. .T. 271 (1955) ; Note, 9 So. W. L. J. 369 (1955) : Note, 29 Tempip L. Q. 103
(1955) : Note, 29 Tulane L. Rev. 793 (1955) ; Note, 62 Dickinson L. Rev. 96 (1957) : Note,
11 So. W. L. ,T. 516 (1957) ; Note, 36 N. Car. L. Rev. 31'5 (1958) : Note. 35 Fordham L.
Rev. 350 (1966) ; Note, 8 B. C. Ind. and Com. L. Rev. 341 (1967) : Note, 13 Wayne L.
Rev. 417 (1967) ; Note, 2 Rutq:ers-Camden L. .T. 302 (1970) : Note, 8 San Dieeo L. Rev. 92
(1970) : Note, 12 B. C. L. Rev. 737 (1971) ; Note, 12 Wm. & Mary L. Rev. 859 (1971).
" PTearings on H.R. 5307, et al., before Antitrust Subcommittee of the House Judiciary
Committee. 85th Cone, 1st Sess. (1957) : Hearings on FT.R. 10378 and S. 4070 before Sub-
committee on Antitrust and Monopoly of the Senate Judiciary Committee, S5th Conrr., 2d
Sess. (1958) ; Hearings on H.R. 2370. et al., before the Antitrust Subcommittee of the House
Judiciary Committee. 86th Cong., 1st Sess. (1959) (not nrinted) ; Hearings on S. 616 and
S. 886 before Subcommittee on Antitrust and Monopoly of the Senate Judiciarv Committee,
86th Cong., 1st Sess. (1959) ; Hearings on S. 3483 before Subcommittee on Antitrust and
Monopoly of the Senate Judiciary Committee, S6th Cong., 2d Sess. (1960) ; Hearings on
S. 2391 before Subcommittee on Antitrust and Mononolv of the Senate Judiciarv Commit-
tee, 88th Cong., 2d Sess. (1964) ; S. Rep. No .1303 ,88th Cong., 2d Sess. (1964) '; Hearings
on S. 950 before Subcommittee on Antitrust and Monopolv of the Sennte .Tudici.nrv Com-
mittee, 89th Cong., 1st Sess. (1965) : S. Rep. No. 462. 89th Cons., 1st Sess. (1965). Bills
Introduced in the 92d Cong.. 1st Sess., and bearing on the subject are S. 2499, S, 261C,
H.R. 2305, H.R. 11033, and H.R. 10825.
66
SO-SOO. § 6(b), so Stat. 1515, 15 U. S. C. §§ 1291-1295, were also expansive rather
than restrictive as to antitrust exemption.^*
V
In view of all this, it seems appropriate now to say that :
1. Professional baseball is a business and it is engaged in interstate commerce.
2. With its reserve system enjoying exemption from the federal antitrust laws,
baseball is, in a very distinct sense, an exception and an anomaly. Federal Base-
hall and Toolson have become an aberration confined to baseball.
3. Even though others might regard this as "unrealistic, inconsistent, or illogi-
cal." see Radovich, 352 U.S., at 452, the aberration is an established one, and one
that has been recognized not only in Federal Baseball and Toolson, but in Schu-
bert,, International Boxing, and Radovlcli, as well, a total of five consecutive cases
in this Court. It is an aberration that has been with us now for half a century,
one heretofore deemed fully entitled to the benefit of stare decisis, and one that
has survived the Court's expanding concept of interstate commerce. It rests on a
recognition and an acceptance of baseball's unique characteristics and needs.
4. Other professional sports operating Interstate— football, boxing, basketball,
and, presumably, hockey ^^ and golf ="— are not so exempt.
5. The advent of radio and television, with their consequent increased coverage
and additional revenues, has not occasioned an overruling of Federal Baseball and
Toolson.
6. The Court has emphasized that since 1922 baseball, with full and continuing
congressional awareness, has been alhnved to develop and to expand unhindered
by federal legislative action. Remedial legislation has been introduced repeatedly
in Congress but none has ever been enacted. The Court, accordingly, has concluded
that Congress as vet has had no intention to subject baseball's reserve system to
the reach of the antitrust statutes. This, obviously, has been deemed to be some-
thing other than mere congressional silence and passivity. Cf. Boys Markets, Inc.
V. Retail Clerks Union, 398 U.S. 235, 241-242 (1970) .
7 The Court has expressed concern about the confusion and the retroactivity
problems that inevitablv would result with a judicial overturning of Federal
Baseball. It has voiced a preference that if any change is to be made, it come by
legislative action that, bv its nature, is only prospective in operation.
8. The Court noted in Radovich, 352 U.S., at 452, that the slate with respect
to baseball, is not clean. Indeed, it has not been clean for half a century-
This emphasis and this concern are still with us. We continue to be loathe. oO
years after Federal Baseball and almost two decades after Toolson, to overturn
those case judicially when Congress, by its positive inaction, has allowed those
decisions to stand for so long and, far beyond mere inference and implication, has
clearly evinced a desire not to disapprove them legislatively.
Accordingly, we adhere once again to Federal Baseball and Toolson and to their
application to professional basel)all. We adhere also to International Boxing and
Radovich and to their respective applications to professional boxing and profes-
sional football. If there is any inconsistency or illogic in all this, it is an incon-
sistency and illogic of long standing that is to be remedied by the Congress and
not by" this Court. If we were to act otherwise, we would be withdrawing from
the conclusion as to congressional intent made in Toolson and from the concerns
as to retrospectivity therein expressed. Under these circumstances, there is merit
in consistency even though some might claim that beneath that consistency is a
layer of inconsistency.
The petitioner's argument as to the application of state antitrust laws deserves
a word. Judge Cooper rejected the state law claims because state antitrust
regulation would conflict with federal policy and because national "uniformity
[is required] in any regulation of baseball and its reserve system." 316 F. Supp.,
at 280. The Court "of Appeals, in affirming, stated. "[A]s the burden on inter-
state commerce outweighs the state's interest in regulating baseball's reserve
IS 15 U.S.C. 1294 reads : , ■, ^ , ^.^ • ^
"Nothim? containprl in this chapter shall be deemed to chanpe, determine, or otherwise
affect the applicahility or nonapplicahiUtv of the antitrust laws to any act, contract, agree-
ment rule course of conduct, or other activity by, between, or anions persons engaging
in condncting, or p.Trticipatinjr in the ortjanized professional team sports of football, base-
ball, basketball, or hoclvpy, except the agreements to which section 1291 of this title shall
apply." (Emphasis supplied.) _ ^ .„„„^
i^'Pffo v Madison Square Garden Corp., 19.58 Tr^de Cases. 169.106 fSDNY 19.58^.
^ Deesen v. Professional Golfers' Association, .S58 F. 2d 16.5 (CA9 1966), cert, denied,
385 U.S. 846 (1966).
67
system, the Commerce Clause precludes the application liere of state antitrust
law." 443 F. 2d. at 268. As applied to organized baseball, and in the light of
this Court's observations and holdings in Federal Baseball, in Toolson, in Schu-
bert, in International Boxing, and in Radnvicli, and despite baseball's allegedly
inconsistent position taken in the past with respect to tlie application of state
law,'^ these statements adequately dispose of the state law claims.
The conclusion we have reached makes it unnecessary for us to consider the
respondents' additional argument that the reserve system is a mandatory sub-
ject of collective bargaining and that federal labor policy therefore exempts the
reserve system from the operation of federal antitrust laws."
We repeat for this case what was said in Toolson :
"Without reexamination of the underlying issues, the [judgment] below
[is] affirmed on the authority of Federal Baseball Club of Baltimore v.
Xatio»al League of Professional Clubs, supra, so far as that decision deter-
mines that Congress had no intention of including the business of baseball
within the scope of the federal antitrust laws.'" 346 U.S., at 3.57.
And what the Court said in Federal Baseball in 1922 and what it said in Toolson
in 1953. we say again here in 1972 : the remedy, if any is indicated, is for con-
gressional, and not judicial, action.
The judgment of the Court of Appeals is
Affirhied.
The Chief Justice and Mr. Justice White join in Parts II, III, and IV of
the Court's opinion and in the judgment of the Court.
Mr. Justice Powell took no part in the consideration or decision of this
case.
Supreme Court of the United States
No. 71-32
Curtis C. Flood, petitioner,
V.
Bowie K. Kuhn el al.
On Writ of Certiorari to the United States Court of Appeals for the Second Circuit
[June 19, 1972]
Mr. Chief Justice Burger, concurring.
I concur in Parts II, III, and IV of the Court's opinion but, like Mr. Justice
Douglas, I have grave reservations as to the correctness of Toolson v. New York,
supra; as he notes in his dissent, he joined that holding but has "lived to regret
it." The error-, if such it be, is one on which the affairs of a great many people
have rested for a long time. Courts are not the forum in which this tangled web
ought to be unsnarled. I agree with Mr. Justice Douglas that congressional in-
action is not a solid ba.se, but the least undesirable course now is to let the matter
rest with Congress ; it is time the Congress acted to solve this problem.
-1 See Respondent's Brief, at fi7, In Federal Baseball and Respondent's Brief, at 30, in
Toolson. See also ^yi.'<con^in v. Milwaukee Braves, Inc., .31 Wis. 2d 699 (1966) ; 144 X. W .
2cl 1, cert, denied, 385 U.S. 990 (1966).
" See M. .Jacobs and R. Winter, Antitrust Principles and Collective Bargaining by
AtlUetes: Of Superstars in Peonage, 81 Yale L. J. 1 (1971), suggesting present-day irrel-
evancy of the antitrust issue.
Supreme Court of the United States
No. 71-32
Curtis C. Flood, petitioner,
V.
Bowie K. Kuhn et al.
On Writ of Certiorari to the United States Court of Appeals for the Second Circuit
[June 19, 1972]
Mr. Justice Douglas, with whom Mr. Justice Brennan concurs, dissenting.
This Court's decision in Federal Baseball Chih v. National League, 259 U.S.
200, made in 1922, is a derelict in the stream of the law that we, its creator should
remove. Only a romantic view ^ of a rather dismal business account over the last
50 years would keep that derelict in midstream.
In 1922 the Court had a narrow parochial view of commerce. With the demise
of the old landmarks of that era, particularly United States v. Knight, 156 U.S.
1, Hammer v. Dagenliart, 247 U.S. 251, and Paul v. Virginia, 8 Wall. 168, the
whole concept of commerce has changed.
Under the modern decisions such as Mandeville Island Farms v. American
Crystal Sugar Co., 334 U.S. 219; United States v. Darby. 312 U.S. 100; Wickard
V. Filburn, 317 U.S. Ill; United States v. South Eastern Underwriters Assn.. 322
U.S. 533, the power of CongTess was recognized as broad enough to reach all
phases of the vast operations of our national industrial system. An industry so
dependent on radio and television as is baseball and gleaning vast interstate reve-
nues (see H.R. Rep. No. 2002, 82d Cong., 2d Sess., 4, n) would be hard put today to
say with the Court in the Federal Baseball Club case that baseball was only a
local exhibition, not trade or commerce.
Baseball is today big business that is packaged with beer, with broadcasting,
and with other industries. The beneficiaries of the Federal Baseball Club decision
are not the Babe Ruths, Ty Cobbs, and Lou Gehrigs.
The owners whose records many say reveal a proclivity for predatory prac-
tices, do not come to us with equities. The equities are with the victims of the
reserve clause. I use the word "victims" in the Sherman Act sense, since a con-
tract which forbids anyone to practice his calling is commonly called an unreason-
able restraint of trade." GardeUa v. Chandler, 172 F. 2d 402. And see Haywood v,
TSlational Basketball Assn., 401 U.S. 1204.
If congressional inaction is our guide, we should rely upon the fact that
Congress has refused to enact bills broadly exempting professional sports from
antitrust regulation." H.R. Rep. No. 2002, 82d Cong., 1st Sess. (1952). The only
statutory exemption granted by Congress to professional sports concerns broad-
casting rights. 15 U.S.C. §§ 1291-1295. I would not ascribe a broader exemption
through inaction than Congress has seen fit to grant explicitly.
1 While I joined the Court's opinion in Toolson v. Netc York Yankees Inc., 346 US, 356.
I have lived to regret it ; and I would now correct what I believe to be its fundamental
2 Had this same group boycott occurred in another industry. Klor's Inc. v. Broadway-Hale
Stores Inc , 3.59 U S 207"; United States v. Shubert, 348 U.S. 223 : or even in another
sport. ffaWM'Oorf v. National Basketball Assn.. 401 U.S. 1204; Radovich v National Foot-
ball League, 352 U.S. 445: United States v. International Boxing Club, 348 U.b. i3b ; we
would have no difficulty in sustaining petitioner's claim. - tt t •
3 The Court's reliance upon congressional inaction disregards the wisdom of Heivertng
V. Hallock. 309 U.S. 106, 119-121, where we Raid : , ,. ^ • * +■„„
"Nor does want of specific Congres.'^ional repudiation serve as an implied instruction
bv Congress to us not to reconsider, in the light of new experience . . . those decisions . . .
It would reauire very persuasive circumstances enveloping Congressional silence to debar
this Court from reexamining its own doctrines. . . . Various considerations of p.arlia-
mentarv tactics and strategy might be suggested for the inaction of . . . Congress, but they
would onlv be sufficient to indicate that we walk on auicksand when we try to nnd in tne
absence of corrective legislation a controlling legal principle." _
And see United States y. South Eastern Underwriters Assn., 322 U.S. 533, 556-o61.
69
There can be no doubt "that were we considering the question of baseball
for the first time upon a clean slate" * we would hold it to be subject to federal
antitrust regulation. Radovich v. National Footiall League, 352 U.S. 445, 452.
The unbroken silence of Congress should not prevent us from correcting our own
mistakes.
Supreme Court of the United States
No. 71-32
Curtis C. Flood, petitioner,
Bowie K. Kuhn et al.
On Writ of Certiorari to the United States Court of Appeals for the Second
Circuit.
[June 19, 1972]
Mr. Justice Marshall, with whom Mr. Justice Brennan joins, dissenting.
Petitioner was a major league baseball player from 1956, when he signed a
contract with the Cincinnati Reds, until 1969, when his 12-year career with the
St. Louis Cardinals, who had obtained him from the Reds, ended and he was
traded to the Philadephia Phillies. He had no notice that the Cardinals were
contemplating a trade, no opportunity to indicate the teams with which he would
prefer playing, and no desire to go to Philadephia. After receiving formal notifi-
cation of the trade, oetitioner wrote to the Commissioner of Baseball protesting
that he was not "a piece of property to be bought and sold irrespective of my
wishes," ' and urging that he had the right to consider offers from other teams
than the Phillies. He requested that the Commissioner inform all of the major
league teams that he was available for the 1970 season. His request was denied,
and petitioner was informed that he had no choice but to play for Philadelphia or
not to play at all. . ,, ^ , ^ ^^
To non-athletes it might appear that petitioner was virtually enslaved to the
owners of major league baseball clubs who bartered among themselves for his
services. But, athletes know that it was not servitude that bound petitioner to
the club owners ; it was the reserve system. The essence of that system is that
a player is bound to the club with which he first signs a contract for the rest of
his playing days." He cannot escape from the club except by retiring, and he
cannot prevent the club from assigning his contract to any other club
Petitioner brought this action in the United States District Court for the
Southern District of New York. He alleged, among other things, that the reserve
system was an unreasonable restraint of trade in violation of federal antitrust
laws '^ The District Court thought itself bound by prior decisions of this Court
and found for the respondents after a full trial. 307 F. Supp. 793 (1970). The
United States Court of Appeals for the Second Circuit afiirmed. 433 F. 2d 204
(1971). We granted certiorari on October 19, 1971, 404 U.S. 880, in order to take
a further look at the precedents relied upon by the lower courts.
■• This case gives us for the first time a full record showing the reserve clause in actual
°^i Lette"r from Curt Flood to Bowie K. Kuhn, December 24, 1969, App., p. 37.
2 As Mr. justice Blackmun points out the reserve systeni is not novel It bas been
einnloved since 1887, See Metropolitan Exhibition Co. v. Ewtng, 42 F. 2d 198. -^■^--■y*
(C Ct SDNY 1890). The club owners assert that it is necessary to preserve effective
competition and to retain fan interest. The players do not agree and argue that the reserve
system is overly restrictive. Before this lawsuit was instituted, the players refused to agree
that the reserve system should be a part of the collective-bargaining contract. Instead the
owners and players agreed that the reserve system would temporarily remain m etTeet v,Mie
they jointly investigated possible changes. Their activity along these lines has halted pend-
° 3 Petltioner°also a/leged a violation of state antitrust laws, state civil-rights laws and
of the common law, and claimed that he was forced into peonage and involuntary servitude
in violation of Thirteenth Amendment to the United States Constitution. Because I believe
that federal antitrust laws govern baseball, I find that state law has been pre-empted m
this area. Like the lower courts, I do not believe that there has been a violation of the
Thirteenth Amendment.
This is a difficult case because we are torn between the principle of stare
decisis and the knowledge that the decisions in Federal Baseball Vlub v. National
League, 259 U.S. 200 (1922), and Toolson v. New York Yankees, Inc., 346 U.S.
356 (1953), are totally at odds with more recent and better reasoned cases.
In Federal Baseball Club, a team in the Federal League brought an antitrust
action against the National and American Leagues and others. In his opinion for
a unanimous Court, Mr. Justice Holmes wrote that the business being considered
was "giving exhibitions of baseball, which are purely state affairs." 259 U.S., at
20S. Hence, the Court held that baseball was not within the purview of the anti-
trust laws. Thirty-one years later, the Court reaffirmed this decision, without re-
examining it in Toolson, a one-paragraph per curiam opinion. Like this case,
Toolson involved an attack on the reserve system. The Court said :
"The business has . . . been left for thirty years to develop, on the under-
standing that it was not subject to existing antitrust legislation. The pres-
ent cases ask us to overrule the prior decision and, with retrospective effect,
hold the legislation applicable. We think that if there are evils in this field
which now warrant application to it of the antitrust laws it should be by
legislation."
Much more time has passed since Toolson and Congress has not acted. We must
now decide whether to adhere to reasoning of Toolson — i.e., to refuse to reexamine
the underlying basis of Federal Baseball Club — or to proceed with a re-examina-
tion and let the chips fall where they may.
In his answer to petitioner's complaint, the Commissioner of Baseball "admits
that under present concepts of interstate commerce defendants are engaged
therein." App., p. 40. There can be no doubt that the admission is warranted by
today's reality. Since baseball is interstate commerce, if we re-examine baseball's
antitrust exemption, the Court's decisions in United States v. Shubert, 348 U,S.
222 (1955), United States v. International Boxing Club. 348 U.S. 236 (1955), and
Radomch v. National Football League, 352 U.S. 445 (1957), require that we bring
baseball within the coverage of the antitrust laws. See also, Haywood v. National
Basketball Association, 401 U.S. 1204 (Douglas, J., Circuit Justice).
We have only recently had occasion to comment that :
"Antitrust laws in general, and the Sherman Act in particular, are the
Magna Carta of free enterprise. They are as important to the preservation of
economic freedom and our free enterprise system as the Bill of Rights is to
the protection of our fundamental personal freedoms. . . . Implicit in such
freedom is the notion that it cannot be foreclosed with respect to one sector
of the economy because certain private citizens or groups believe that such
foreclosure might promote greater competition in a more important sector of
the economy." United States v. Topco Associates, Inc., U.S. ,
(1972).
The importance of the antitrust laws to every citizen must not be minimized. They
are as important to baseball players as they are to football players, lawyers, doc-
tors, or members of any other class of workers. Baseball players cannot be denied
the benefits of competition merely because club owners view other economic
interests as being more important unless Congress says so.
Has Congress acquiesced in our decisions in Federal Baseball Club and Tool-
son? I think not. Had the Court been consistent and treated all sports in the
same way baseball was treated, Congress might have become concerned enough
to take action. But. the Court was inconsistent, and baseball was isolated and
distinguished from all other sports. In Toolson the Court refused to act l)ecause
Congress had been silent. But the Court may have read too much into this
legislative inaction.
Americans love baseball as they love all sports. Perhaps we become so
enamored of athletics that we assume that they are foremost in the minds of
legislators as well as fans. We must not forget, however, that there are only
some 600 major league baseball players. Whatever muscle they might have been
able to muster by combining forces with other athletes has been greatly impaired
by the manner in which this Court has isolated them. It is this Court that has
made them impotent, and this Court should correct its error.
We do not lightly overrule our prior constructions of federal statutes, but
when our errors deny substantial federal rights, like the right to compete freely
and effectively to the best of one's ability as guaranteed by the antitrust laws,
we mu.st admit our error and correct it. We have done so before and we .'Should
do so again here. See, e.g., Blonder-Tongue Laboratories, Inc. v. University of
71
Illinois Foundation, 402 U.S. 313 (1971) ; Boys Market, Inc. v. Retail Clerics
Union, 398 U.S. 235. 241 (1970). *
To the extent that there is concern over any reliance interests that club owners
may assert, they can be satistied by making our decision prospective only. Base-
ball should be covered by the antitrust laws beginning with this ca.se and hence-
forth, unless Congress decides otherwise."
Accordingly, I would overrule Federal Baseball Club and Toolson and reverse
the decision of the Court of Appeals.'
This does not mean that petitioner necessarily prevails, however, Lurking in the
background is a hurdle of recent vintage that petitioner still must overcome. In
19f)G, the :Major League Players Association was formed. It is the collective-
bargaining representative for all major league baseball players. Respondents argue
that the reserve system is now part and parcel of the collective-bargaining agree-
ment and that because it is mandatory subject of bargaining, the federal labor
statutes are applicable, not the federal antitrust laws.' The lower courts did not
rule on this argument, having decided the case solely on the basis of the antitrust
exemption.
This Court has faced the interrelationship between the antitrust laws and the
labor laws before. The decisions make several things clear. First, [b]enefits to
organized labor cannot be utilized as a cat's paw to pull employer's chestnuts
out of the antitrust fires." United States v. Womens Sport.nvear Manufacturers'
Assn., 33G U.S. 4(i0. 401 (1949). See also, Allen Bradley Co. v. Local Union No. 3,
.32.") U.S. 797 (194")). Sectmd. the very nature of a collective-bargaining agree-
ment mandates that the i)arties be able to '-restrain" trade to a greater degree
than management could do unilaterally. United States v. Hutchcson, 312, U.S.
219 (1941) ; United Mine Worl-ers v. Pennington, 381 U.S. 657 (1965) : Anial-
(lamated Meat Cutters v. Jeivel Tea, 381 U.S. 6.57 (19(55) ; cf.. Teamsters Union
v. Oliver. 358 U.S. 284 (1959). Finally, it is clear that some cases can only be
resolved by examining tlie purposes and the competing interests of the labor and
antitrust statutes and by striking a balance.
It is apparent that none of the prior cases is precisely on point. They involve
union-management agreements that work to the detriment of management's com-
petitors. In this case, petitioner urges that the reserve system works to the detri-
ment of labor.
While there was evidence at trial concerning the collective-bargaining rela-
tionship of the parties, the issues surrounding that relationship have not been
fully explored. As one commentator has suggested, this case "has been litigated
with the implications for the institution of collective bargaining only dimly per-
ceived. The labor law issues have been in the corners of the case — the courts be-
low, for example, did not reach them — moving in and out the .shadows like an
uninvited guest at a party whom one can't decide either to embrace or expel." *
3t is true that in Rad'orieh v. National Football League, supra, the Court
rejected a claim that federal labor statutes governed the relationship Itetween
a professional athlete and the professional sport. But. an examination of the
Itriefs and record in that case indicates that the issue was not squarely faced.
The issue is once again before this Court without being clearly focused. It
should, therefore, be the subject of further inquiry in the District Court.
There is a surface appeal to respondents' argument that petitioner's .sole
remedy lies a claim with the National Labor Relations Board, but this argument
is preniised on the notion that management and labor have agreed to accept the
i-eserve clause. This notion is contradicted, in part, by the record in this case.
Petitioner suggests that the reserve .system was thrust upon the players by the
owners and that the recently formed player's union has not had time to modify
or eradicate it. If this is true, the question arises as to whether there would
* In the past this Court has not hesitated to change its view as to what constitutes inter-
<^t;itp oninmeiicp Compare Uvited Staten v. Kniqht Co., 1.56 U.S. ] (189.5), with MandeviVe
Island Farms v. American Crystal Sugar Co., 334 U.S. 219 (1948), and United States v.
yjorh'/. 312 U.S. 100 (1941). ^ . ,. . , , ,
"The jurist concerned with 'public confidence in, and acceptance of the judici.il system
nii.eht well consider that, however admirable its resolute adherence to the law as it was,
a decision contrary to the public sense of justice as it is, operates, so far as it is ljno\yn,
to diminish respect for the courts and for law itself." Szanton, Stare Decisis ; A Dissenting
View. 10 Hastings L. J. 394. 397 (1959). . , ,
= We said recently that "ti]n rare cases, decision construing federal statutes might be
denied full retroactive effect, as for instance where this Court overrules its own construc-
tion of a statute, . . ." United Slates v. Estate of Donnelly, 397 U.S. 286, 297 (1970). Cf.
Simpson v. Union Oil of California, 377 U.S. 13, 25 (1964).
8 The lower courts did not reach the question of whether, assuming the antitrust laws
applv, thev have been violated. This should be considered on remand.
■ Ct United States v. Hutcheson, 312 U.S. 219 (1941) .
s .Jacobs & Winter, Antitrust Principles and Collective Bargaining by Athletes : Ot
Superstars in Peonage, 81 Yale L.J. 1, 22 (1971).
72
then l»e any exemption from the antitrust laws in this case. Petitioner also sug-
gests that there are limits to the antitrust violations to which labor and manage-
ment can agree. These limits should also be explored.
In light of these considerations, I would remand this ease to the Dit^trict
Court for consideration of whether petitioner can state a claim under the anti-
trust laws despite the collective-bargaining agreement, and if so, for a deter-
mination of whether there has been an anti-trust violation in this case.
Civ. 25164, 26363, 26621.
Lemat Corp., a Dklaware corporation, the General Partner of a limited
PARTNERSHIP DOING BUSINESS UNDER THE NAME OF SaN FRANCISCO WARRIORS,
Plaintiff, Cross-Defendant and respondent,
V.
Richard F. Barry, III, also known as Rick Barry, Defendant,
cross-complainant and appellant (two cases).
Lemat Corp., a Delaware corporation, the General Partner of a limited
partnership doing business under the name of San Francisco Warriors,
plaintiff and appellant,
V.
Richard F. Barry, III, also known as Rick Barry,
defendant and respondent.
Court of Appeals, First District, Division 2, Aug. 19, 1969.
Rehearing Denied Sept. 18, 1969.
Action for injunctive relief. The Superior Court, City and County of San
Francisco, Robert J. Drewes and Walter Carpeneti, JJ., rendered judgment
and appeals were taken. The Court of Appeal, Taylor, J., held that provision
in professional basketball player's contract with basketball club that club could
tender player a contract for next succeeding year and if player failed to sign
contract and return it to club the contract would be deemed renewed for one
year gave club option to renew contract for a second year, and statute provid-
ing that contract to render special, unique or unusual service may be enforced
for not to exceed seven years did not give club right to injunctive relief beyond
the second year, and club was not entitled to damages in addition to injunctive
relief.
Affirmed.
1. Contracts — 217 ; Injunction — 60, 197
Provision in professional basketball player's contract with basketball club
that club could tender player a contract for next succeeding year and if player
failed to sign contract and return it to club the contract would be deemed
renewed for one year gave club option to renew contract for a second year,
and statute providing that contract to render special, unique or unusual service
may be enforced for not to exceed seven years did not give club right to injunc-
tive relief beyond the second year, and club vv^as not entitled to damages in
addition to injunctive relief. West's Ann.Labor Code, § 2S55; West's Ann.Civ.
Code, § 3423; West's Ann.Code Civ.Proc §§ 526, 580.
2. Contracts— 202(2)
Any agreement that limits person's ability to follow his vocation must be
strictly construed.
3. Injunction — 197
Plaintiff in injunction suit is entitled to no more than relief consisting of
injunction against future injury and damages for past injury.
4. Judgement — 204
A plaintiff cannot obtain equitable relief commensunte with its claim of
rights and damages in addition thereto.
5. Appeals and Error — 803
73
Dismissal of appeal is in effect affirmance of judgment. West's Ann.Code
Civ.Proc..§ 955.
Luther J. Avery, Robert L. Dunn, Bancroft, Avery & McAlister, Richard J.
Archer, Morrison, Foerster, Holloway, Clinton & Clark, San Francisco, for
Lemat Corp.
Loeb & Loeb, Herzstein, Maier & Carey, Los Angeles, for Richard F.
Barry III.
Taylor, Associate Justice
These consolidated appeals^ involve an action for injunctive relief brought
by the owner and operator of a professional basketball team, Lemat Corpora-
tion (hereafter Lemat), against one of its former players, defendant Richard
F. Barry III (hereafter Barry). Lemat appeals from a portion of the final
judgment in its favor granting a one-year injunction (No. 26363), contending
that it was entitled to injunctive relief for seven years, as well as damages.
Barry cross-appeals from the judgment (No. 26621), contending only that the
trial court's findings on damages should be stricken.^
Lemat is a Delaware corporation qualified to do business in the State of
California, and also is the sole general partner of a limited partnership that
owns and operates a professional basketball team under the name of the San
Francisco Warriors (hereafter the Warriors) under a franchise from the
National Basketball Association (hereafter NBA). NBA is a joint venture that
operates a professional basketball league in the United States, consisting of
member teams who play professional basketball in the various cities.
Barry is a professional basketball player whose great talents and abilities
draw substantial attendance to the games in which he participates. Barry
entered his first contract with the Warriors for the 1965-1966 season ^ in
May 1965, prior to his graduation from college. At that time, he sought advice
from his coach who had considerable experience in professional basketball,
both as a player and coach. On or about August 29, 1966. Barry entered into
another contract with the Warriors. This contract contained paragraph 24.
set forth in the footnote below,^ the so-called "'option" or "reserve clause"
that is the crux of this dispute.
Barry played professional basketball for the Warriors during the 1966-1967
season and performed all of the covenants and conditions of the contract and
was paid the full compensation of .$75,000 provided for by the contract. On
June 20, 1967, pursuant to paragraph 24, the Warriors delivered and mailed
to Barry a proposed contract for the 1967-1968 playing season at a proposed
compensation of $75,000 a year. On or about June 22, 1967, Barry received
this contract, but did not sign or return it.
On June 19, 1967, Barry granted to Charles E. "Pat" Boone (hereafter
Boone) and S. D. Davidson an option to acquire his services as a professional
basketball player for the 1967-1968 season, and received an assignment for the
transfer of a certain undivided interest in the Oakland franchise of the Ameri-
can Basketball Association (hereafter ABA), a Delaware corporation organized
and existing for the purposes, among others, of forming, managing, operating,
and advising a professional basketball league with member clubs in various
cities of the United States. Thereafter, pursuant to the option, on September
1 Initially, there was a third matter, No. n.5164, Barry's appeal from the order of
August 8, 1967. granting a preliminary injunction to September 1968. However, that
appeal is now moot and herebv dismissed (Paul v. Milk Depots, Inc., 62 Cal.2d 129,
134, 41 Cal.Rptr. 468, 396 P. 2d 924).
2 Although the permanent injunction granted by the final judgment expired on
September 30, 1968, long before the consideration of the appeals, the issues here raised
are of sufficient nublic interest and, therefore, not moot (County of Madera v. Gendron.
59 Cal.2d 798, 804. 31 Cal.Rptr. 302, 382 P.2d 342).
3 The professional basketball season does not begin until October and team training
begins in August.
4 "24. On or before September 1 next following the last playing season covered by
this contract and renewals and extensions thereof, the Club may tender to the Player
a contract for the next succeeding season bv mailing the same to the Player at his
address shown below, or if none is shown, then at his address last known to the Club.
If the Player fails, neglects, or omits to sirrii and return such contract to the Club
so that the Club receives it on or before October 1st next succeeding, then this contract
shall be deemed renewed and extended for the period of one year, upon the same terms
and conditions in all respects as are provided herein, except that the compensation
payable to the Player shall be the sum provided in the contract tendered to the Player
pursuant to the provisions hereof, which compensation shall in no event be less than
75% of the compensation payable to the Player for the last playing season covered by
this contract and renewals and extensions thereof."
"9 1967 BaTy signed an ABA standard player contract with Oakland Basket-
ball Inc (hereafter Oaks), the owner and operator of the ABA franchise for
Oakland, California, of a professional basketball team under the name of the
r»aks This agreement provided for compensation of $75,000 a year, plus an
am<nint equal to the lesser of 5 percent of all sross gate receipts received by
the club per year in excess of ?60,000, or $15,000. It also provided for liquidated
damasjes of $750,000 if Barry did not sign the contract or perform thereunder
and contained a renewal option provision substantially similar to that con-
tained in the NBA agreement. The same day. the Oaks executed another con-
tract agreeing to indemnify Barry for any liabilities or other losses, including
attorney fees, that he might incur by reason of his executing the option or
the contract with the Oaks. . .-^ » .^ q
On June 22. 1967. Lemat filed its complaint in this action. On August «.
1967 Lemat obtained a preliminary injunction preventing Barry from playing
P'-ofessional basketball except for the Warriors until September 30, 1968. Thus.
Barry "sat out" the 1967-196S season, and was paid $75,000 by the Oaks.
The matter was tried in July 1968. The court found the facts as stated
above and further found that if Barry had fulfilled his contract and played
for the Warriors during the 1967-1968 season, their gate receipts would have
grown by at least 25 percent (the average figure for growth ^^.S^te receipts in
the NBA) to approximatelv $750,000. rather than the approximately $346,000
received that season. Therefore, the Warriors suffered a gross attendance loss
of $404 000 from which amount must be deducted additional expenses of
S48 480 for' a net loss of $356,000. If Barry had played for the Oaks during
the' 1967-1968 season, the Warriors' gate receipts for that season would have
been even less. . . •, , -n-
The court further found that because the ^^ arriors had primarily built
their style of play and public image around Barry, and the special, unique,
unusual' and extraordinarv character of Barry's services, the loss to the War-
riors of his services for a second year could not be adequately compensated
for in money The Warriors and the Oaks directly compete with each other
for attendance within the same market and if Barry were permitted to play
for the Oaks during the term of his contract, the Warriors would suffer ir-
rf*Dfirfil-)lo ini iirv
The cour*^ con'cluded that: 1) Barry's August 29, 1966 contract with the
Warriors v.'as a contract of adhesion but did not contain any ambiguity to
be resolved against the Warriors; 2) paragraph 24 of the contract contained
a valid renewal option for Barry's services for one additional year on the same
terms and conditions as the first year, except for salary, and was neither
uncertain unfair, unjust, unconscionable nor lacking in mutuality of remedy;
3) the compensation of no less than 75 percent of the $75,000 specified for the
first year was adequate and reasonable compensation for the services to be
Performed by Barrv and for his agreement not to play for anyone else for
an additional vear; 4) the contract bound Barry to play for a second year
after the expiration of the initial year as a result of the Warriors' exercise
of the renewal option and this was the understanding of the parties. It was
not their understanding that Barry was merely to be prohibited from signing
a contract with another team in the NBA and was free to go to a team in
another league after playing for the Warriors for one year; 5) the limited
restriction on Barry's freedom to contract imposed by paragraph 24 was
reasonable and necessary to provide that stability and continuity required for
efficient management of a sports league and in the long run rebounds to the
benefits of bofh players and teams: 6) Barry's failure to play out the option
for the additional year with the Warriors was a deliberate breach of his
contractural obligations; 7) Barry's breach of contract did not extend the
term of the contract or otherwise broaden the Warrior's rights; and 8) al-
though Barry's breach damaged the Warriors in the sum of at least $356,000.
they were liot entitled to judgment therefor. Accordingly, the trial court
entered its final judgment dated November 6. 1968, enjoining Barry from
playing for any other team until September 30, 1968.
I. lemat's appeal (no. 26363)
[1] Lemat contends that it was entitled to a permanent injunction for seven
years as well as damages in the amount found by the trial court.
Lemat first argues that the court erred in granting injunctive relief for only
the one vear remaining of the two-year term of the contract. We think the
75
court's construction of paragi'aph 24 of the option provision, as providing for
a second year in addition to the initial year, is an eminently reasonable one
that follows the well-thought out decision in Central New York Basketball,
Inc. V. P.arnett (Ohio Com.Pl.. 1061) 181 N.E.2d 50(1). a case almost on all
fours with the instant one. In Barnett, the owner of an NBA franchised pro-
fessional basketball team sought to enforce a substantially similar renewal
option 5 against a player who, like Barry, after the first year, entered into an
agreement to play with a team franchised by the ABA. The court held that
the reasonable practical construction of the renewal option was that the club
could renew the player's contract for an additional year.s and that so inter-
preted, the renewal provision did not lack mutuality and was supported by
sufficient consideration." We think the identical reasoning applies here.
Lemat, however, argues that while Barnett may be an accurate statement of
the law of Ohio, California Labor Code, section 28");") (and the related provi-
sions of Civil Code, section 3423 and Code of Civil Procedure, section r)20) indi-
cate a public policy that compels a different result in this instance. Lemat
contends that public policy expressed in these California statutes (set forth,
so far as pertinent, in the footnote below )« requires the inclusion of an im-
plied covenant of seven years in every contract for unique personal services,
where the minimum compensation is not less than .$G,000 per annum and,
therefore, it was entitled to a permanent injunction for seven years.
We do not agree. In the first place, the language of Labor Code, section 2855
is clearly language of limitation ; the same is true of the related language in
the Civil Code and Code of Civil Procedure. In the second place, the contract
here was for a maximum period of two years, and did not contain six separate
renewal options to extend the term of employment for successive periods of
a year at succe.ssively higher salaries, as in Warner Bros. Pictures v. Brodel,
5 The option provision there involved read as follows: "22. (a) On or before Sep-
tember 1st (or if a Sunday, then the next preceding: business dav) next following the
last playing season covered by this contract, the Club mav tender to the Player a
contract for the term of that season by mailing the same to' the Player at his address
following his signature hereto, or if none be given, then at his last' address of record
with the Club. If prior to the November 1 next succeeding said September 1, the
player and the Club have not agreed upon the terms of such contract, then on or
before 10 days after said November 1. the Club shall have the right by written notice
to the Player at said address to renew this contract for the period of 'one vear on the
same terms, except that the amount payable to the Player shall be such as the Club
shall fix in said notice; provided, however, that said' amount shall be an amount
payable at a rate not less than 75% of the rate stipulated for the preceding year."
6 The court specifically rejected the argument put forth by the competing' team,
that the renewal provision applies to the whole contract and. " therefore, the contract
was one for perpetual services and consequently void. Lemat does not make a similar
argument here.
7 The court said at page .512: " '* * * The authorities are to the effect that so
long as there is consideration for the obligation of the defendant, it is not essential
that there be mutuality of obligation between plaintiff and defendant in order to
sustain a right of action in the plaintiff against the defendant for a breach of such
obligation ;***.' "
8 Labor Code, section 2855 : "A contract to render personal service, other than a
contract of apprenticeship as provided in Chapter 4 of this division, may not be
enforced against the employee beyond seven .years from the commencement of service
under it. Any contract, otherwise valid, to perform or render service of a special,
unique, unusual, extraordinary, or intellectual character, which gives it peculiar value
and the loss of which cannot be reasonably or adequately compensated in damages
in an action at law, may nevertheless be enforced against the person contracting to
render such service, for a term not to exceed seven years from the commencement of
service under it."
Civil Code, section .3423 provides, so far as pertinent : "An injunction cannot be
granted :
^ :i: t- * * * ti
"To prevent the breach of a contract, other than a contract in writing for the
rendition or furnishing of personal services from one to another where the minimum
compensation for such services is at the rate of not less than six thousand dollars
per annum and where the promise service is of a special, unique, unusual, extraordinary
or intellectual character, which gives it peculiar value the loss of which cannot be
reasonably or adequately compensated in damages in an action at law, the performance
of which would not be specifically enforced ; * * *."
Code of Civil Procedure, section 526 provides, so far as pertinent : "An injunction
may be granted in the following cases :
*******
"To prevent the breach of a contract (other than a contract in writing for the
rendition or furnishing of personal service from one to another where the minimum
compensation for such service is at the rate of not less than six thousand dollars per
annum, and where the promised service is of a special, unique, unusual, extraordinary
or intellectual character which gives it a peculiar value the loss of which cannot be
reasonably or adequately compensated in damages in an action at law) the performance
of which would not be specifically enforced ; * * *."
76
31 Cal2d 766 192 P.2d 949, 3 A.L.R.2d 691. and Be Haviland v. Warner
Brothers Pictures, 67 Cal.App.2d 225, 153 P.2d 983, cited by Lemat. In Houston
Oilers, Inc. v. Neely, 361 F.2d 36, likewise the injunction was confined to the
three-year period covered by the contract. Furthermore, the rationale under-
lying the enforcement of negative covenants in contracts involving the unique
personal services of star performers and athletes, is that the employer has
contracted for the exclusive right to display the "star" for a given period.
That no other entrepreneur may display the particular star during the period
contracted for is part of the right for which the employer has bargained and
has compensated the star (Lvmley v. Wagner, 42 Eng.Rep. 687 ).9
[21 The trial court found that the contract here was one of adhesion and
as such must be strictly construed against Lemat. Furthermore, any agreement
that limits a person's ability to follow his vocation must be strictly construed
{Holdeen v. Ratterrce (D.C.N. Y.1958) 166 F.Supp. 694). Lemat has not cited
(nor have we been able to find) a single decision that would support its posi-
tion The authorities are to the contrary {Foxx v. Williams, 244 Cal.App.2d
223 '52 Cal.Rptr. 896; Loeiv's, Inc. v. Cole, 185 F.2d 641 (9 Cir. 1950). We hold
that the trial court properly concluded that Barry's breach could not enlarge
Lemat's rights to an injunction beyond the term of the contract. As stated in
Machen v. Johansson, D.C.. 174 F.Supp. 522, a page 529, footnote 8: "Surely,
had the contract been performed, he [the employer] would not have been en-
titled to deny defendant the right to perform for others beyond the date con-
traced for. A breach of the contract cannot broaden his right."
[3 41 Lemat's remaining contention that it is entitled to damages, in addi-
tion to the injunction, is likewise not supported by any authority. The general
rule is that a plaintiff in an injunction suit is entitled to no more than relief
consisting of an injunction against future injury and damages for past injury
{Harvey v. White, 213 Cal.App.2d 275, 28 Cal.Rptr. 601). It is well settled that
a plaintiff cannot obtain equitable relief commensurate with its claim of rights
and damages in addition thereto (Ahbott v. 76 Land and Water Co., 161 Cal.
42 118 P. 425; Thresher v. Clark, 45 Cal.App. 518, 188 P. 55).
The out-of-state authorities cited by Lemat do not support its unique con_-
tention. Mantell v. International Plastic Harmonica Corj}., 141 N.J.Eq. 379, 5-3
A 2d 250 173 A.L.R. 1185, merely points out that a court of equity may award
damages' for a breach based on losses suffered prior to the preliminary injunc-
tion. W. T. Grant Co. v. Indian Trail Trading Post, Inc. (Ky.l968) 423 S.W.2d
251, held that where equity will not, for reasons of economic waste, decree the
removal of an excessive portion of a structure, it may in lieu award damages.
Similarly, Weishrodt v. Norris (1947) 332 Ill.App. 279, 75 N.E.2d 50, held that
the trial court has discretion to award damages in lieu of the injunctive relief
sought, when it deems an injunction or specific performance unduly onerous or
incapable of enforcement. j.^ ■, ^
We need not discuss the matter in great detail, as it is clear from the plead-
ings and the pretrial order that Lemat's request for relief was in the alterna-
tive. Although the request for damages was first made at the trial and the trial
court ruled "that the question was properly before it, no effort was made to
amend the pleadings to conform to proof or otherwise. The record clearly
indicates that the court's denial of damages was based on its view that the
remedies sought should be considered as alternatives. Lemat's claim for damages
could acquire significance only if its request for injunctive relief was denied
or was found to be not appropriate under the circumstances (Broivn Derby
Hollywood Corp. v. Hatton, 61 Cal.2d 855, 858, 40 Cal.Rptr. 848, 395 P.2d 898).
Even assuming that the court could have granted damages pursuant to Code
of Civil Procedure, section 580, the evidentiary and logical basis of the trial
court's finding here is arguable. As noted in Central New York Basketdall v.
Barnett, supra, damages in a situation of this kind are speculative and uncer-
9 Although the English courts appear to be more inclined to enforce negative cove-
nants (see Tannenbaum. Enforcement of Personnl Service Contracts in the Entertain-
ment Industry, 42 Cal.L.Rev. 18). we doubt that they would agree with Lemat s
interpretation' of the contract which, in our view, would condemn professional ball
nlavers to the involuntary servitude repugnant to the Thirteenth Amendment to the
United States Constitution (Gardella v. Chandler (2 CCA 19-19) 172 F.2d 402. 409:
see also Pierce, Organized Professional Team Sports and the Antitrust Laws, 4^
Cornell L.Q. 586, and 62 Yale L.J. 622-636 K We also note, as one article points out.
while the enforcement of longer option periods may he proper in the kindred motion
picture industry cases, the services rendered by motion picture players are of a
different nature, usually rendered over a longer period of time and compensated for
by much larser money amounts, as well as by management rights (see 81 Harvard U.
Rev. 418, 419).
tain and practically impossible to ascertain. We hold that the trial court
properly concluded that Lemat was entitled to a permanent injunction until
September 30, 1968, but was not entitled to injunctive relief beyond the term
of the contract or damages in addition to the injunctive relief. Accordingly,
the various issues raised by the parties concerning the enforceability and
legality of the contract or the application of the federal and state antitrust
laws require no discussion. We turn briefly to Barry's cross-appeal.
[5] Barry's Cross- Appeal (No. 26621)
As indicated above, the only contention on the cross-appeal is that the court's
finding on damages should be stricken as surplusage. As we have already noted
in our discussion of Lemat's contention concerning damages, the trial court
here properly concluded that damages could not be awarded. Accordingly, the
finding as to the amount of damages is surplusage and should be stricken
(Baglione v. Leue, 160 Cal.App.2d 731, 733-734, 325 P.2d 471; Alonzo v. Hills,
95 Cal.App.2d 778, 789, 214 P.2d 50).
The appeal in No. 25164 is dismissed ^o and the judgment in Nos. 26363 and
26621 is affirmed. Each party to bear his own costs on appeal.
SHOEMAKER, P. J., and AGEE, J., concur.
No. 757982.
Central New York Basketball, Inc., plaintiff,
V.
Richard Barnett and Cleveland Basketball Club, Inc., defendants.
Court of Common Pleas of Ohio, Cuyahoga County
Dec. 21, 1961
Basketball club's action against player which it had under contract for
ensuing year and against another club in another league for which the player
had contracted to play, to enjoin him from playing for such club and to enjoin
it from interfering with performance of his contract with plaintiff. The Court
of Common Pleas, Danaceau, J., held, inter alia, that plaintiff club which had.
under valid provisions of uniform player contract, renewed a player's contract
for ensuing year was entitled to injunction to prevent him from playing basket-
ball for another club in another league in violation of his contract with it
and was entitled to injunction to prevent such other club from interfering
with performance of such contract.
Judgment for the plaintiff.
1. Contracts— 217
Under National Basketball Association uniform player contract provision
for renewal stating that if player and club have not agreed upon terms for
succeeding year by stated date, club shall have right to renew on same terms
except for salary, when club so elects, former contract has been completed
and is at an end and it is not void as providing for perpetual service.
2. Contracts— 247
Evidence established that plaintiff basketball club and defendant player had
reached understanding that defendant would play for club at stated salary
for ensuing season under renewal provisions of contract.
3. Contracts— 217
Renewal clauses which were integrated part of National Basketball Associa-
tion uniform player contract were valid and enforceable.
4. Injunction — 60
Professional basketball club which had, under valid provisions of uniform
player contract, renewed a player's contract for ensuing year, was entitled to
injunction to prevent him from playing basketball for another club in another
10 The dismissal of an appeal is in effect an affirmance of the judgment (Code
Civ.Proc. § 955). This is the proper disposition of the preliminary injunction here as
in affirming the permanent injunction, the merits of the case have been reached
(cf. Paul V. Milk Depots, Inc., supra).
78-465 — 72 — pt. 1 6
league in violation of his contract with it and was entitled to injunction to
prevent such other club from interfering with performance of such contract.
Marshman. Hornbeck, Hollington. Steadman & McLaughlin, Cleveland, George
Gallantz. New York City, and Edward Crouch, Jr., Cleveland, of counsel,
for plaintiff.
Walter & Haverfield. McCreary, Hinslea & Ray. Creighton Miller, Cleveland
and F. Wilson Chockley, Jr., Lee Hinslea, Cleveland, of counsel, for defendants.
Danaceau, Judge.
This is an action for injunctive relief brought by the plaintiff, Central New
York Basketball, Inc., a New York corporation, against Richard Barnett and
Cleveland Basketball Club, Inc., a corporation. Plaintiff owns and operates
a professional basketball team under the name of Syracuse Nationals, having
a franchise of the National Basketball Association, now in its IGth season.
The defendant. Richard Barnett. a professional basketball player, the No. 1
draft choice in 1959 of the plaintiff and who played for the plaintiff during
the ensuing 19.59 basketball season, played for the Syracuse club throughout
the 1960 basketball season under a signed and executed Unifrom Player Con-
tract of the National Basketball Association under the date of March 16. 1960
by and between the plaintiff and said defendant, a copy of said agreement is
attached to the petition, and was received in evidence as plaintiff's Exhibit B.
The defendant, Cleveland Basketball Club, Inc., is a member of the American
Basketball League, recently organized, and owns and operates a professional
basketball team.
In July of 1961, the defendants, Barnett and Cleveland Basketball Club, Inc.,
made and entered into an American Basketball League Player Contract in
which the club engaged the player to render his services as a basketball player
for a term beginning on September 15. 1961 and ending on September 14, 1962,
a copy of said contract having been received in evidence as plaintiff's Exhibit A.
The National Basketball Association has professional basketball clubs in the
cities of New York, Philadelphia, Syracuse, Boston, Detroit, Cincinnati, Chi-
cago. St. Louis and Los Angeles. The American Basketball League has profes-
sional clubs in the cities of Washington, Pittsburgh, Cleveland, Chicago, Kansas
City. San Francisco and Los Angeles and the State of Hawaii.
Plaintiff claims that the defendant, Barnett. is a professional player of great
skill and whose talents and abilities as a basketball player are of special,
unique, unusual and extraordinary character ; that the defendant, Cleveland
Basketball Club, Inc., knew that he was under contract with the plaintiff; that
in accordance with the terms and conditions of said contract the plaintiff
exercised a right to renew said contract for an additional year as provided
therein and so notified the defendant Barnett, that the defendant Barnett
breached the said contract by failing and refusing to play with and for the
said plaintiff during the 1961-1962 playing season, and that said breach of
contract was committed with the knowledge and participation of the defendant,
Cleveland Basketball Club. Inc.
Plaintiff claims that it cannot reasonably or adequately be compensated for
damages in an action at law for the loss of defendant Barnett's services as
required by said contract and an oral agreement between plaintiff and Barnett
made in May of 1961, and that plaintiff will suffer immediate and irreparable
damages. Plaintiff, therefore, prays :
1. that defendant Richard Barnett be restrained and enjoined, during the
pendency of this action and permanently, from playing basketball or engaging
in any activities relating to basketball for The Cleveland Basketball Club, Inc.,
or any person, firm, club or corporation other than the plaintiff, during the
1961-i962 ba.sketball season.
2. that defendant Cleveland Basketball Club. Inc. be restrained and enjoined,
during the pendency of this action and permanently, from any interference or
attempted interference with the performance by the said Richard Barnett of
his contract with plaintiff.
The defendant. Cleveland Basketball Club. Inc., admits that the defendant
Barnett is a professional basketball player but denies that he is of great skill
and denies that his talents and abilities as a basketball player are of special,
unique, unusual and extraordinary character ; and further admits that the
defendant Barnett has played professional basketball in the National Basket-
ball Association as an employee of the plaintiff. The defendant club denies that
it had knowledge that the defendant Barnett was under contract with the
plaintiff as alleged and denies that it solicited defendant Barnett to enter into
V!
a contract to play basketball for the defendant club, or that it persuaded
defendant Baraett' to enter into a contract with it with the intention of induc-
ing defendant Barnett to breach his alleged contract with the plaintifC. and
denies that the alleged contract was in effect for the 1961-1962 playing season,
but admits that it entered into a written contract with defendant Barnett for
the 1961-1962 playing season. Except for the admissions specifically made, the
defendants deny specifically all other allegations contained in the petition.
The defendants, Barnett and Cleyeland Basketball Club, Inc., further allege
that plaintiff is a "foreign corporation and that it has no standing in the courts
of Ohio without complying with the Foreign Corporation Act, which it has
not done." „ , „ ^^ .c i. 4-v,
The separate answer of the defendant, Richard Barnett. conforms to the
answer of the Cleyeland Basketball Club. Inc. and further admits that on or
about March 16, I960, he and the plaintiff signed a written document and that
a copy of the said document, annexed to the petition as Exhibit A, is a true
copy thereof, but denies that said instrument is a contract. Said defendant
further admits that he played professional basketball for plaintiff during the
1960-1961 season and that plaintiff paid him the sum of $8,500. but denies that
as partial consideration therefor he promised to giye the plaintiff the right to
renew said contract as proyided in paragraph 22(a) thereof and promised not
to play otherwise than with plaintiff. The said defendant further denies that
plaintiff exercised its option to renew the alleged contract with him for the
next playing season and denies that plaintiff, through its General Manager,
negotiated with him as to the amount to be paid for the 1961-1962 basketball
season and denies that the parties agreed that he would be paid $11,500 for
the next season. The defendant Barnett admits that on or about May 26, 1961,
plaintiff dispatched to him by registered mail copies of an alleged contract in
substantially the same form as Exhibit A annexed to the petition, that it was
dated May 26, 1961 and that said copies had not been returned to plaintiff by
him The said defendant specifically denies that said alleged contract was agreed
to by the parties. The defendant further admits that he has publicly stated that
he does not intend to plav basketball for the plaintiff during the 1961-1962
basketball season and admits that at the time of the filing of the petition he
was taking part in training and practice sessions with the Cleveland Basketball
Club, Inc. basketball team and was engaged in activities relating to basketball
with the defendant corporation.
Both defendants deny plaintiff's allegation that plaintiff has been and is
now ready, willing and able to fulfill all the terms and conditions of its alleged
contract with the defendant Barnett and has offered so to do.
The written agreement under date of March 16, 1960 and signed by the plain-
tiff and the defendant Barnett provides in part as follows :
"5. The Player promises and agrees (a) to report at the time and place fixed
by the Club in good physical condition; and (b) to keep himself throughout
the entire season in good physical condition; and (c) to give his best services,
as well as his lovalty, to the Club, and to play basketball only for the Club
unless released, .sold or exchanged by the Club; and (d) to be neatly and fully
attired in public and always to conduct himself on and off the court according
to the highest standards of honesty, morality, fair play and sportsmanship,
and (e) not to do anything which is detrimental to the best interests of the
Club or of the National Basketball Association or of professional sports.
"9. The Player represents and agrees that he has exceptional and unique
skill and ability as a basketball player; that his services to be rendered here-
under are of a special, unusual and extraordinary character which gives them
peculiar value which cannot be reasonably or adequately compensated for in
damages at law, and that the Player's breach of this contract will cause the
Club great and irreparable injury and damage. The Player agrees that, in
addition to other remedies, the Club shall be entitled to injunctive and other
equitable relief to prevent a breach of this contract by the Player, including,
among others, the right to enjoin the Player from playing basketball for any
other reason or organization during the term of this contract.
"22. (a) On or before September 1st (or if a Sunday, then the next preced-
ing business day) next following the last playing season covered by this con-
tract, the Club" may tender to the Player a contract for the term of that
season by mailing the same to the Player at his address following his signature
hereto, or if none be given, then at his last address of record with the Club.
If prior to the November 1 next succeeding said September 1, the player and
80
the Club have not agreed upon the terms of such contract, then on or before
10 (lays after said November 1, the Club shall have the right by written notice
to the Player at said address to renew this contract for the period of one
year on the same terms, except that amount payable to the Player shall be such
as the Club shall fix in said notice ; provided, however, that said amount shall
be an amount payable at a rate not less than 75% of the rate stipulated for
the preceding year. . , , . », i,
(b) The Club's right to renew this contract, as provided m subparagraph
(a) of this paragraph 22, and the promise of the Player not to play otherwise
than with the Club have been taken into consideration in determining the
amount payable under paragraph 2 hereof."
[1] Plaintiff contends that the foregoing provisions provide for two alterna-
tives: 1) that the parties may agree upon a signed new contract for the ne-vt
succeeding playing season and 2) in the event a signed agreement is not made,
the club has the right to renew the contract for a period of one year on the
same terms, except that the salary shall be fixed by the club and shall be
payable at a rate not less than the stipulated minimum.
The plaintiff contends that under the second alternative, the terms are the
same as in the preceding year except for the amount of salary and that at
the close of the renewal year, the contract has been completed and is at an end.
The defendants, on the other hand, interpret the contract to provide for
perpetual service and, consequently, is void. It is said in 11 O.Jur.2d at
page 398 : . . ^ ^
"Generally, a liberal construction should be put upon written instruments
so as to uphold them, if possible, and carry into effect the intention of the
parties. Courts are required, by applying known rules of law, to enforce valid
and reasonable contracts of parties, with the view of carrying out their clear
intent, rather than, by resorting to technical construction, to render such con-
tracts' void. A contract should be given that construction that will uphold it
and preserve to the parties thereto their rights, if the same can be done without
doing violence to the language of the contract. Wherever the language of a
contract will permit, it should be so construed as to support rather than to
destroy legal obligation. * * *
" * >:: * If the language of a contract is susceptible of two constructions, one
of which will render it valid and give effect to the obligation of the parties,
and the other will render it invalid and ineffectual, the former construction
must be adopted."
Then continuing on page 399, it is said :
"In construing a written instrument, effect should be given to all of the words
if this can be done by any reasonable interpretation; and it is the duty of a
court to give effect to all parts of a written contract, if this can be done con-
sistently with the expressed intent of the parties. If possible, every provision
in a contract should be held to have been inserted for some purpose and to
perform some office, and an attempt must be made to harmonize, if possible,
all the provisions of a contract."
The construction of the contract urged by plaintiff, to which it is committed
in open court, is reasonable, rational, practical, just and in accordance with
the foregoing principles, and is adopted by this Court.
The defendant Barnett had previously played for the Syracuse team during
the greater part of the 1959-1960 season under a signed contract.
Daniel Biasone, the President and General Manager of the Syracuse club,
testified that near the close of the 1960-19G1 season in March of 1961, he told
the defendant Barnett that Barnett was one of seven players he would keep
exempt from the forthcoming draft of players from all National Basketball
Association clubs to stock the new Chicago club and that Barnett was one of
the seven players he was "protecting."
In the latter part of May, 1961, Mr. Biasone reached the defendant Barnett
by telephone, and they discussed salary for the next season and agreed upon
an increase of $3,000 which would bring the salary of Barnett to $11,500. He
further testified that Barnett said. "You mail them (contracts) down and I
will sign them and return them." (R. 52) On cross-examination Biasone said
that he was not sure and did not know whether Barnett said "I will
sign." (R.108)
The defendant Barnett testified (R. 176) :
"Q What did he say?
"A Well, he called me up and said that he wanted to discuss contracts for
the coming year.
81
"Q What did you say?
"A I said that I thought I was worth $3000 more.
"Q And he said?
"A He agreed. He said, 'I think you are worth $3000 more myself.'
"I said, 'Send the contracts and I will look them over.' "
New contracts with the signature of plaintifE thereon were mailed to the
defendant Barnett on May 26, 1961 ; and they remained with Barnett unsigned
ever since.
In June of 1961. there was a telephone conversation between Jerry Walser,
the Business Manager of the Syracuse club, and the defendant Barnett in which
Barnett asked for an advance. Barnett testified (R. 184-185) :
"Q What else was said in this conversation?
"A Well, I asked for au advance on my — I asked for an advance of $300.
"Q $300?
"A That's right.
"Q Did he say he would send you $300?
"A He said as soon as Mr. Biasone returned — that he was away and that
as soon as he could get his signature that they would advance the $300."
On July 10, 1961, the plaintifE, through Jerry Walser, mailed to Barnett a
letter enclosing a check for $3,000. Mr. Biasone testified (R. 55) :
"Q * * * Was money sent to Barnett for the 61-62 season, the current
season?
"A Yes.
"Q When was that sent?
"A The early part of July.
'^Q Of this year?
"A This year.
"Q And why was it sent?
"A It was asked for.
"Q By whom?
"A By Dick.
"Q How much money was sent to Mr. Barnett?
"A $3000."
The letter and check were received by Barnett and remained in the sealed
envelope until produced in court during a hearing on an application for a
preliminary injunction on October 9, 1981.
Finding that the contracts mailed to Barnett were not returned and not
hearing from Barnett, IMr. Biasone made repeated attempts to contact or
reach the defendant Barnett in July and August of 1961 by telephone, tele-
gram and letter, to all of which there was no response. On November 6, 1961,
a letter from the plaintiff to the defendant was written and mailed and re-
ceived by Barnett which reads as follows :
"It is our position that your 1960-61 contract with us was renewed when
we came to terms and we sent you an advance. However, to abide by the letter
of the contract and to make the position cf the Syracuse Nationals absolutely
clear, we hereby notify you that pursuant to Paragraph 22(a) of said contract,
we hereby renew the same for the period of one year ending October 1, 1962.
The amount payable to you under such renewed contract is hereby fixed at
$11,500."
Meanwhile, during the months of June and July of 1961, Barnett met and
talked to his former coach and advisor, John B. McLendon, who was the
Coach of the Cleveland Pipers Basketball team of the defendant Cleveland
Basketball Club, Inc. Both Barnett and McLendon stated that Barnett did
not want to play for Syracuse but did want to play for the Cleveland Pipers.
However, they were both concerned about the Kenny Sears case, then pending
in the California court. It appears that Sears was trying to "jump leagues"
(R. 211) to play for San Francisco and both wanted to see the outcome of the
case. Undoubtedly, this explains the lack of communication from Barnett to
the Syracuse club during June and July of 1961, his failure to return the
contracts and his failure to open the envelope containing the letter and check
enclosed therein.
Relying upon a newspaper story and their interpretation thereof to the
effect that Sears "would not be penaliaed for going to this new League,"
Barnett and McLendon proceeded to take the necessary steps culminating in
a signed contract between Barnett and the Cleveland Pipers with McLendon
signing the contract on behalf of the Cleveland club.
82
[21 The request of Barnett for an advance, whether it was $300 or $3,000,
renders strong support to the chiim of phiintiff that an oral agreement on a
salary had been reached and that Barnett would play for Syracuse during the
1961-1902 season. Manifestly, unless there was such an understanding, there
could be no salary upon which such an advance could be made. The evidence
is overwhelming, and this Court finds that the plaintiff and the defendant
Barnett reached an understanding that Barnett would play for Syracuse during
the 1961-1962 season at a salary of ,$11,500. It is also quite clear that Barnett
and McLendon of the Cleveland Pipers were acting in concert in awaiting
the ruling in the Sears case ; and after reading the newspaper report, decided
that Barnett could "jump" without penalty and sign up with the Cleveland
Pipers. Barnett and McLendon decided that they had the green light and the
•■jumi)" was made.
[3] The defendants challenge the validity and enforceability of the renewal
provisions of the contract on the ground that they lack mutuality. The re-
newal clause.s are an integral part of the contract, and there is sufficient
consideration for the obligations and duties arising thereunder.
In Fiirhs v. Motor Stage Co., 135 Ohio St. 509, 515, 21 N.E.2d 669, 673, it
was said :
.. H-. * * -jjjg authorities are to the effect that so long as there is considera-
tion for the obligation of the defendant, it is not essential that there be
mutuality of obligation between plaintiff and defendant in order to sustain
a right of action in the plaintiff against the defendant for a breach of such
obligation ; * * *."
and at page 520, 21 N.E.2d at page 675 :
"Since the plaintiff has given full and adequate consideration to the defendant
in the purchase of the stock in the defendant comi)any, there is a binding
obligation upon the part of the defendant to carry out its covenant in the con-
tract to purchase its requirements from the plaintiff so long as the plaintiff'
retains the stock and furnishes the merchandise requirements to the defendant
as stipulated in the contract. While there is no mutuality of obligation, there
is .sufficient consideration to require perfoi'mance upon the part of the defendant
so long as the plaintiff demands it within the term of the contract and so long
as he himself complies with the conditions which keep the contract in force."
In the celebrated case of Philadelphia Boll Cluh v. Lajoie, 202 Pa. 210. 51
A. 973, 975, 58 L.R.A. 227, 229, the opinion of the court reads :
"We are not persuaded that the terms of this contract manifest any lack itf
mutuality in remedy. Each party has the possibility of enforcing all the rights
stipulated for in the agreement. It is true that the terms make it possible for
the plaintiff to put an end to the contract in a space of time much less than
the period during which the defendant has agreed to supply his personal serv-
ices ; but mere difference in the rights stipulated for does not destroy mutuality
of remedy. Freedom of contract covers a wide range of obligation and duty as
between the parties, and it may not be impaired, so long as the bounds of
reasonableness and fairness are not transgressed."'
and at page 2.30, 51 A. at page 975 :
"The case now before us comes easily within the rule as above stated. The
defendant sold to the plaintiff, for a valuable consideration, the exclusive right
to his professional services for a stipulated period, iniless sooner surrendered
by the plaintiff, which could only be after due and reasonable notice and pay-
ment of salary and expenses until the expiration. Why should not a court of
equity protect such an agreement until it is terminated? The court cannot
compel the defendant to play for the plaintiff, but it can restrain him from
playing for another club in violation of his agreement. No reason is given why
this should not be done, except that presented by the argiiment, that the right
given to the plaintiff to terminate the contract upon 10 days' notice destroys
the mutuality of the remedy. But to this it may be answered that, as already
stated, the defendant has the possibility of enforcing all the rights for which
he stipulated in the agreement, which is all that he can reasonably ask. Fur-
thermore, owing to the peculiar nature and circumstances of the business, the
reservation ui)on the part of the plaintiff to terminate upon short notice does
not make the whole contract inequitable."
This coTirt holds that the renewal provisions of the contract involved herein
are valid and enforceable.
83
Plaintiff claims that defendant Barnett is a professional basketball player
of great skill and whose talents and abilities as a basketball player are of
special, unique, unusual and extraordinary character.
There is some disgreement in the testimony as to the ability and standing
of Barnett as a basketball player. Daniel Bia.sone, the General Manager of
the Syracuse club for the past 16 years, testified that (R. 47) : "As of now
I think Richard Barnett is one of the greatest basketball players playing the
game." "he is an exceptionally good shooter." (R. 48) "He is above average
* * * with other foul shooters in the National Basketball As.sociation and that
he ranked 19th in the whole league (approximately 100 players) scoring, play-
ing as a guard." (R. 48 and 49.) He further testified ( R. 153) :
"Q What is your opinion as to his ability, this is, as a guard, now. at
driving?
"A Terrific.
"Q What is your opinion as to his ability as play making as a guard?
"A Good. He has all the abilities a good basketball player should have. He
has all the talent of a great basketball player. He is terrific all the way
around."
Mr. Biasone also testified on cross-examination that he would place Barnett
in the group of some specifically-named nine or ten unusual and extra-ordinary
players in the National Basketball Association. (R. 109 and 110.)
Mr. Biasone also testified that Barnett was a box office attraction and was
asked on cross examination : "on what basis do you say he was a great box
office attraction?" He answered (R. 128) :
"A Because he, in my opinion, he is such a tremendous ball handler and he
does things that have crowd appeal, he is noticeable. He appeals to the crowd
because he does things extraordinary."
Coach McLendon of the Cleveland Pipers is not so generous in his appraisal.
Barnett, in his opinion, is not in the class of the specifically named outstanding
basketball players. McLendon concedes that both Barnett and Neuman. now
plaving for Syracuse in his first year as a professional, are both "pretty
good." (R. 256)
The defendant Barnett was asked by his counsel (R. 195) :
"Q Do you represent to this Court that you have exceptional and unique
skill and ability as a ba.sketball player?
"A No.
"Q Do you represent to this Court that your services are of a special,
unusual and extraordinary character ?
"A No.
"Q You do represent to the Court that you are a professional basketball
player ; is that correct?
"A Yes.
"Q Do you think you are as good as Oscar Robertson?
"A No."
The defendants also presented one James Palmer, a professional basketball
player, who testified that he did not think Barnett was playing the right posi-
tion as a guard ; that he is very weak on defense as far as driving goes ; that
he "goes straight for the boards" (R. 227) "Rather than pass it to somebody
or set up a play." (R. 228) Palmer concedes that Barnett "is a very good
shooter" (R. 228) Mr. Palmer does not put Barnett in the class with the
specifically-named basketball players who he said, "are just about in a class
by themselves."
That the defendant Barnett was 19th among the top 25 scorers in the Na-
tional Basketball As.sociation in the 1960-61 season is confirmed in the statistics
published on page 113 of the official Guide (plaintiff's Exhibit 4). On page 190
of the Guide is the record of Richard Barnett which indicates that he played
in 78 games (out of 79) in the 60-61 sea.son for a total of 1,970 minutes: that
his F.G.M. percentage was .452 ; that his F.T.M. percentage was .712 and that
he scored 1,.320 points for an average of 16.9. The Gxiide also indicates that
Barnett was not among the players in the East-West All Star Game on January
17. 1961 (Guide 144), nor was he among the plavers named in the U. S. Bas-
ketball Writers' All-NBA Team for 1961 (Guide 184).
The defendant Barnett may not be in the same class with the top ten bas-
ketball players. The Syracuse manager is not a disinterested witness, and he
may have given an immoderate appraisal of the playing abilities of Barnett.
On the other hand, neither are McLendon nor Barnett disinterested witnesses.
84
McLendon's eagerness to secure the services of Barnett at a high salary
($13,000) indicates a higher opinion of Barnett's playing abilities than he
was willing to concede at the trial of this case. Barnett was understandably
under embarrassment when asked to give his opinion of his own abilities and
to make comparisons with another named player.
The increase of salary from $8,500 to $11,500 agreed to by plaintiff, the
Cleveland Basketball Club's willingness to pay $13,000, and the latter's eager-
ness to secure his services, all point to a high regard for his playing abilities.
Whether Barnett ranks with the top basketball players or not, the evidence
shows that he is an outstanding professional basketball player of unusual
attainments and exceptional skill and ability, and that he is of peculiar and
particular value to plaintiff.
His signed contract with Syracuse provides:
"9. The Player represents and agrees that he has exceptional and unique
skill and ability as a basketball player ; that his services to be rendered here-
under are of a special, unusual and extraordinary character which gives them
peculiar value which cannot be reasonably or adequately compensated for in
damages at law, and that the Player's breach of this contract will cause the
Club great and irreparable injury and damage. The player agrees that, in
addition to other remedies, the Club shall be entitled to injunctive and other
equitable relief to prevent a breach of this contract by the Player, including,
among others, the right to enjoin the Player from playing basketball for any
other person or organization during the term of this contract."
The Cleveland contract contains a similar provision, which reads :
"12. The Player represents and agrees that he has exceptional and unique
skill and ability as a basketball player; that his services to be rendered here-
under are of a special, unusual and extraordinary character, which gives them
peculiar value which cannot be reasonably or adequately compensated for in
damages at law, and that the Player's breach of this Contract will cause the
Club great and irreparable injury and damage. The Player agrees that, in
addition to other remedies, the Club shall be entitled to injunctive and other
equitable relief to prevent a breach of this Contract by the Player, including,
among others, the right to enjoin the Player from playing basketball for any
other person or organization during the term of this Contract, or any renewal
thereof."
The aforesaid provisions are contained in uniform players' contracts and it
would seem that mere engagement as a basketball player in the N.B.A., or
A.B.L.. carries with it recognition of his excellence and extraordinary abilities.
An important growth in the field of equity has been the use of injunctions
against the breach of negative agreements, both express and implied. Pom-
eroy's Specific Performance of Contracts, Third Ed. at page 75 reads :
"Another class of contracts stipulating for personal acts are now enforced
in England by means of an injunction. Where one person agrees to render
personal services to another which require and presuppose a special knowledge,
skill, and ability in the employe, so that, in case of a default, the same services
could not easily be obtained from others, although the affirmative specific
performance of the contract is beyond the power of the court, its performance
will be negatively enforced by enjoining its breach. This doctrine applies espe-
cially to contracts made by actors, public singers, artists and others possessing
a special skill and ability. It is plain that the principle on which it rests is
the same with that which applies to agreements for the purchase of land or
of chattels having a unique character and value. The damages for the breach
of such contracts cannot be estimated with any certainty, and the employer
cannot, by means of any damages, purchase the same services in the labor
market."
Pomeroy continues :
"The more recent American cases are in accord with the English rule stated
in the text, and where one person agrees to render personal services to another
which require and presuppose a special knowledge, skill and ability in the
employee, so that in case of default, the same services could not easily be ob-
tained from others, equity will negatively enforce the contract by enjoining
its breach."
The opinion of the Court in PhiladelpJiia Ball Clnl) v. Lajoie, supra, is sum-
marized in 58 L.R.A., 227 in the head notes as follows:
"1. Impossibility of obtaining equivalent service is not necessary to support
an injunction against breach of a contract to render personal services exclu-
sively to plaintiff; it being sufficient if no certain pecuniary standard exists
for the measurement of the damages.
"2 Injunction will issue to prevent a baseball player from violating his con-
tract to serve a certain organization for a stipulated time, during which he
is not to play for any other club, where he is an expert player, has been with
the organization sufficiently long to have become thoroughly familiar with the
team work, and is a most attractive drawing card for the public because of
his great reputation for ability in the position which he fills.
"3 Lack of mutuality of remedy will not prevent an injunction against breach
of a contract to render exclusive services as a ball player because the options
of renewal and of terminating the contract on ten days' notice rest only with
the employer, where such options expressly form part of the consideration for
which the compensation is paid— at least, after the contract has been partly
performed."
A recent case decided May 26, 1961, in the Court of Appeals of Texas and
reported in 348 S.W.2d 37, is that of Dallas Coivboys FootMU Club v. Harris,
in which according to the head notes the Court held :
"2. Injunction. Injunctive relief will be granted to restrain violation by
employee of negative covenants in personal service contract if employee is a
person of exceptional and unique knowledge, skill and ability in performing
the service called for in the contract.
* H^ * * * iiJ *
"7. Injunction. Where one person agrees to render personal services to
another, which requires and presupposes a special knowledge, skill and ability
in employee, so that in case of default same service could not easily be obtained
from others, his performance will be negatively enforced by enjoining its
breach, and proof of impossibility of obtaining equivalent service is not re-
quired as condition of relief.
* X! * * * * *
"15. Monopolies. A contract whereby player agreed to play professional foot-
ball for certain club for one year, club having option of renewal for another
year, did not violate anti-trust laws.
"16. Master and Servant. A contract whereby player agreed to play profes-
sional football only for designated club for one year with option of renewal
for another year was not so unreasonable and harsh as to be unenforceable
Another recently reported case is that of Winnipeg Rugby Football Club v.
Freeman, 140 F.Supp. 36.5, in the United States District Court N. D. of Ohio
B. D., in which it was held that where contracts between football players and
foreign football club for services of the players were for services of special
merit, were of peculiar and particular value to the club and contained cove-
nants' against playing for anyone else, where damages in case of breach were
incapable of definite measurement and club was willing and able to fulfill its
part of the contract, and where domestic club which had contracted with
players after the foreign club had contracted with them had, before contracting
with the plavers, heard statements and rumors to effect that players had
already contracted with the foreign club, district court would exercise its
discretion in favor of preliminarily enjoining performance of contract between
players and the domestic club.
Jones, Chief Judge, in his opinion said :
"There are a few certain key cases which have been controlling authority
in controversies of this character. If the present facts fit into the essentials
for injunctive relief the plaintiff should prevail.
"Starting with Lumley v.Guye, 118 Eng. Reprint 749 and Lumley v. Wagner,
42 Eng. Reprint 687, continuing with the principles there set down through
the Philadeli)hia Ball Club v. Lajoie case, 202 Pa. 210, 51 A. 973, 58 L.R.A. 227
and Warner Bros. Pictures, Inc. v. Nelson {Bette Davis), (1937) 1 K. B. 209,
(1936) 3 All. E. R. 160, and other cases we finally find, for us, authoritative
pronouncement approving the principles of such cases in our own Court of
Appeals in Bach v. Friden Calculating Mach. Co., 6 Cir., 155 F.2d 361, at page
366. Thus it will be found that these principles effectively apply to such con-
tracts as are here under consideration in view of the fact that the law of
Manitoba which controls is conceded to be the same as would apply in a like
case here.
86
"Are the essentials present here to support injunctive relief as prayed?
It is my considered judgment that they are and I so find the facts and circum-
stances in evidence responding to those essential requirements.
"The contracts were for services of special merit : they were of peculiar
and particular value to the plaintiff ; there was a covenant against playing
for anyone else; damages in case of breach were incapable of definite meas-
urement ; the plaintiff is willing and able to fulfill its part of the contract."
Of considerable interest is the further comment of Judge Jones :
"Ordinarily and under disinterested circumstances I would give great weight
to the judgment of Coach Brown as to the value of a football player. He
testified that the two defendants only were 'good' football players but not
specially skilled, although the consideration for their contracts with the Browns
seemed to me to recognize in them (especially Freeman) rather promising
talent of something more than ordinary skill for a beginner in professional
football (although they had to make the teem to get the consideration called
for by those contracts)."
The Judge concludes :
"While the Browns' evidence was that they had no positive knowledge of
the defendant players' contracts with the Winnipeg Club, yet they had heard
statements and rumors to that effect, as I think, sufficient to put them upon
inquiry and notice. The effect of having the players sign contracts to play with
the Browns and in fact having them join the team for practice in such cir-
cumstances is to have participated in securing the breach of the plaintiffs
contracts and accordingly should be made subject to injunctive process."
Other cases in support of the position taken by plaintiff are American League
Basehall Cluh of New York v. Pasquel. 187 Misc. 230. 6.3 N.Y.S.2d 537 (1946) :
Long Lsland American Association Football Cluh v. Manrodt, Sup., 23 N.Y.S.2d
8;'<S (1940); Comstock v. Lopokowa. 190 F. 599, Circuit Court S.D. N.Y.
(Dancers).
[4] Professional players in the major baseball, football, and basketball
leagues have unusual talents and skills or they would not be so employed. Such
players, the defendant Barnett included, are not easily replaced.
"The right of the plaintiff is plain and the wrong done by the defendants is
equally plain, and there is no reason why the Court should be sparing in the
apiilication of its remedies.
Damages at law would be speculative and uncertain and are practically
impossible of ascertainment in terms of money. There is no plain, adequate
and complete remedy at law and the injury to the plaintiff is irreparable.
Professional baseball, football, and basketball require regulations for the
protection of the business, the public and the players, and so long as they are
fair and reasonable there is no violation of the laws on restraint of trade.
The evidence before this Court does not show any unfair or unreasonable act
on the part of the plaintiff and the Court concludes that the claim of the
defendant that the contract is in restraint of trade is without merit.
This Court also concludes from the evidence that the plaintiff is authorized
to bring this action in this court under the laws of Ohio, and is properly
before this Court.
The Court finds in favor of the plaintiff on all issues joined and permanent
injunctions as requested for the 1961-1962 basketball playing season are de-
creed. Thereafter the said injunctions shall be dissolved.
Senator Ervin. Do you have a statement?
Senator Tunney. Yes, I do. Thank you, ]\Ir. Chairman.
After savorino; the rich and spicy language of the acting Chairman
of the committee, I am afraid that my statement is going to sound
like unsalted porridge. However, Mr. Chairman, I would like to
make mv brief statement.
]Mr. Chairman, tlte issue before this committee is larger than just
the question of a merger of two professional basketball leagues. In
mv opinion it goes to the survival of professional sports in America
todav.
87
I can remember when in order to read the sports pages the only
requirement was that you had to be a sports fan. Today that is all
different. You now have to be a lawyer, an expert in the stockmarket,
familiar with geography and an eternal optimist.
Reading the sports pages today, one can easily have the feeling
that he is following a midafternoon soap opera. Is the old town
team going to move or will it be saved at the last minute ? Will the
star play this year or not? Who is playing out his option?
To put it bluntly, the sports fans of this country are being short-
changed in a price' war that could well be fatal to a lot of franchises
and millions of fans.
It is my hope that these hearings will be used to investigate all
sides of tlie story— the owners, the players and the fans. It is essential
that there be a full scale inquiry into all of the contractual aspects
of professional sports in order to bring some semblance of order to
a situation that is now quite chaotic.
In any event, it is my hope that the hearings will be both fair and
thorough and that all parties wdll utilize this opportunity to present
their case to the Congress so that the interests of the fans will be
protected.
And I might add a pertinent note, ^Mr. Chairman, as the son of
an athlete who made a considerable amount of money as the result
of the skill that he had with his fists, I am cognizant of the fact that
what we are talking about is giving to the fans an opportunity to
see that they get a fair return for the money that they expend.
Personallv I think that one of the reasons that the great sport of
boxing has fallen on such lean days is that it got into the hands of
those who are not at all concerned about the fan. In fact, in many
instances they were concerned to arrange the outcome of the event so
that as professional gamblers they could make a significant profit.
And I think that if you chart the decline and fall of boxing, it failed
as a sport when it ignored the fan ; and when there was contemptuous
attitude toward those people who are supporting the sport, and I
feel that what we are dealing with here in essence is giving to the
people of this country an opportunity which I think that they
deserve, to be spectators, whether watching television or in the arena,
to be spectators and watching players of their choice and teams of
their choice engage in competition. In my mind competition is the
soul of American sports and it is part of the soul of the average
American. That is one of the reasons that I think this country has
achieved the greatness that it has. And sports have been an aspect
of this.
So it would be my hope that as these hearings progress that the
litmus test we use in evaluating the legislation that has been intro-
duced is the interest of the fans. I think if we take care of their
interests, we will have taken care of the interests of the players and
the interests of the owners.
Thank you, Mr. Chairman.
Senator Ervin. I think you made a very fine statement. It was
nothing like porridge.
Mr. CiitTMBras. Mr. Chairman, Senator Hruska was called out of
the hearing room by the Chairman of the Judiciary Committee so
that he may conduct the hearings on the five judges before the
Judiciary Committee this morning. He will return and he reserved
the right to give his statement at that time, so you may proceed.
Senator Ervin. In other words, it is satisfactory with Senator
Hruska for us to proceed with the hearing?
Mr. Chumbris. Yes, sir; and he will read his statement
Senator Ervin. Here he is now.
Senator Hruska. Thank you Mr. Chairman. I appreciate the
chairman's indulgence. Another subcommittee was without a chairman
and I temporarily relieved the situation, but the Senator from
Arkansas appeared. He is carrying on, so I am able to come here to
resume my participation in this hearing.
Mr. Chairman, this bill is occasioned by the distressing news to
millions of sports fans throughout the country that professional
basketball is in grave and imminent danger.
_ This should not be surprising news. The root of the trouble is the
disastrous annual player bidding war for graduating college talent,
although there are other causes as well.
Such player bidding competition has come to require spending
for that purpose bearing no relation to sound basketball economics.
Each of at least five teams this past season paid out more in salaries
than its entire gross revenues. In the past two seasons more tlian lialf
of the teams in each league operated at a loss.
These bidding practices are ruinous for all concerned. Yet it would
be ruinous for either league to unilaterally abandon them. Joint
action by the two leagues is inhibited by antitrust laws. Clearly
this cannot continue. To do so would soon destroy the clubs and tlie
leagues which provide to millions of fans a wholesome and attractive
sports activit3\
The solution in the judgment of many is to grant basketball tlie
same limited exemption from antitrust laws which Congress granted
to football in 1966, 5 years ago. That is why a total of 26 Senators — •
myself as the introducer and the junior Senator from California,
ISIr. John Tunney as principal cosponsor, plus 23 others, support tliis
bill to enable the two professional basketball leagues to join together
in a single leagl^e, receiving the same minimum authority to merge
as that which the Congress granted to the two professional football
leagues in 1966.
At this point I should like my statement to include the names
of the colleagiies of the Senate who have joined as cosponsors.
In addition to Senator Tunney and myself, the following col-
leagues are included in the list of sponsors: Mr. Allott, Mr. Baker,
ISIr. Beall, Mr. Bennett, Mr. Brock, Mr. Cook, Mr. Cranston, Mr.
Dole, Mr. Dominick, Mr. Eastland, Mr. Fannin, Mr. Gravel, Mv.
Kennedy, Mr. Metcalf, Mr. Moss, Mr. Ribicoif, Mr. Saxbe, Mr. Scott,
Mr. Taft, Mr. Talmadge, Mr. Thurmond, Mr. Hatfield, Mr. Mathias,
and Mr. Cooper.
In considering this proposal, we have the 5-year history of football
to draw upon; that, since the enactment in 1966 of a similar bill
applying to professional football and its two leagues as of that time.
Various witnesses have been called upon for the instant hearing.
They will include those representing the two leagues, the representa-
tives of clubs involved, the players themselves and their organizations.
89
Yet there is one other party in interest to which, I am sure, Con-
gress will accord paramount interest. And that is the public itself.
It is the fans who have made basketball the sport enjoying the widest
geographical distribution of any professional spoit in the Na-
tion today. The fans want this sport continued and on a desirable
foundation.
The pending measure and the hearings upon it are an effort to
insure that the sport, the players and the fans will be enabled to
enjoy the many benefits of professional basketball.
There are other organizations and persons who are deeply inter-
ested. Among them are officials and other witnesses who will testify
on behalf of high schools, the junior high schools and the colleges;
also organizations of other sports.
They have been notified some time ago of the present hearings.
It is expected that sometime next month further hearings will be
held at which time these others will be afforded an opportunity to
be heard.
This subcommittee is interested in securing as much balanced
and complete information and views as we can.
There is no doubt about the proposition that the burden of proof
should be on any advocate for an exemption to the antitrust laws._
In this connection, it should be recalled that the Congress has in
recent years several times granted such exemptions. We have had
in 1961' exemptions for televising of professional sports, in 1958 the
Small Business Act of 1953, in 1966 the Bank Merger Act exemp-
tions, and the football merger bill which passed in that year; and
last year, in 1970, the Newspaper Preservation Act.
In each of those cases there were circumstances which prevailed
that seemed in the judgment of the Congress to be sufficiently per-
suasive to grant an exemption which is narrow in each instance and
carefully regulated and supervised.
In the report of the Senate antitrust subcommittee of February
26, 1963, at which time we were considering the railroad merger
problem, there is a listing of specific exemptions from antitrust laws,
and I ask that the record contain that list at this point, ]\Ir.
Chairman.
Senator Ervin. Without objection so ordered.
(The report referred to follows:)
Senate Antitrust Subcommittee Report, February 26, 1963
the railroad merger problem, appendix b — specific
exemptions from ANTITRUST LAWS
Clavton Act, 15 U.S.C. 17 (194G) (all labor organizations).
McCarran-Ferguson Act, 15 U.S.C. 1013 (1952) (insurance companies).
Webb-Pomerene Act, 15 U.S.C. 62 (1946) (limited exemption for foreign
Capper-Voistead Act, 7 U.S.C. 291, 292 (1927) (farm cooperatives).
Interstate Commerce Act, 49 U.S.C. 5(11) (1952) (carries participating m
an approved transaction).
Civil Aeronautics Act, 49 U.S.C. 494 (19.52) (exemption for acts ordered by
the CAB). ^ .
Jtlarket entry is carefully regulated in some of the country's largest busi-
nesses :
Natural Gas Act, 15 U.S.V. 7171 (natural gas companies).
Federal Communications Act, 47 U.S.C. 307. 307(a) (1952) (limits new
stations).
90
Civil Aeronautics Act, 49 U.S.C. 481(d) (1951) (limits market entry).
Price fixins in some areas is authorized by the legislature :
Reed-Bulwinkle Act, 49 U.S.C. 5b (1952) (railroad rate agreements).
Civil Aeronautics Act, 49 U.S.C. 492 (1952) (approval of transportation
rate agreements).
Miller-Tvdings Act, 15 U.S.C. 1 (1946) (resale price maintenance).
Shipping Act, 46 U.S.C. 814 (1952) (water carriers' rate agreements).
Combination of strong competitors in some major instances lias been encour-
aged :
Federal Communications Act, 47 U.S.C. 221(a), 222(c) (1) (1952).
Federal Power Act, 16 U.S.C. 824(a) (1952).
Interstate Commerce Act, 49 U.S.C. 5b (1952) (1952) (all common
carriers).
Benefits Fob The Players
The present allocation of resources and revenues in professional basketball
Is economically unsound. The astronomical salaries received each year by new
and untested superstars simply remove from available resources large amounts
which could otherwise be employed to the benefit of the vast majority of play-
ers. The players stand, directly and substantially, to benefit from the merger:
1. The merger of the two independent leagues into a single expanded league
will preserve the job opportunities offered by professional basketball. It will
bring economic stability to teams now facing frequent franchise shifts and pos-
sible financial ruin. Every franchise failure means the loss of 12 player jobs.
2. The stability afforded by the merger will improve the earning opportuni-
ties' of many clubs. There will be equally attractive employment opportunities,
and comparable earning opportunities, for all 28 franchises, as well as a sound
basis for expansion.
3. The merger will make it possible for clubs to allocate benefits more equi-
tably between veterans and rookies. Under the conditions of the bidding war,
the veterans who make up the vast majority of players, bear the brunt of the
pre.sent misallocation of resources.
4. By restoring balanced competition, every team will have a greater oppor-
tunity for championship potential and every player will have a greater oppor-
tunity to participate with a championship team.
5. The collective bargaining power of the players will be strengthened by
their combination into a single industry-wide bargaining unit embracing all of
the players. This is evidenced by the vigorous negotiations by professional
footballplavers since the merger of the NFL and the AFL.
The attainment of these benefits does not sacrifice the individual bargaining
power of tlie established players with ability. Success in professional sports de-
pends upon team spirit and ability, which are undermined by player dissatis-
faction.
Senator Hruska. There are problems connected with any exemp-
tion. The Chairman has drawn, in a very hicid and logical opening
statement, attention to some of them. There are those who will con-
tend that the only reason for the institution of the common draft and
the passage of this bill is the pocketbook of the owners. To those
who hold that conviction, more honor to them.
However, there are some who believe that in the situation that we
liave now, there is some reason to believe that some players are
preferred inordinately and perhaps disproportionately with the pos-
sible and potential result of chaos and confusion and perhaps destruc-
tion of organized basketball as it now exists in the two leagues.
So that in due time when all the evidence is in, there are those
of us who l^elieve that it will be for the Congress to exercise an
option, an option to preserve what we have for a short time, followed
by perhaps a termination, a fiscal and financial catastrophe and hard-
ship, and in that way to pay our respects and our deference to the
inviolate character of the antitrust laws, saying there must be com-
petition, there must not be restraint of trade.
91
There are others who will say the second option is better. It has
been followed in football. We will be interested in hearing from those
who liave had experience under that act.
There are other instances of exemption from the antitrust laws
and this is a logical place to assert that exemption again, and for
well-reasoned propositions.
It is on that basis that we are opening the hearings today, and in
that spirit, to find out whether or not those are the two options and
it is either the one or the other that will prevail as a result of our
action or failure to act in this regard.
I thank you, Mr. Chairman, for your courtesy in allowing me to
make this statement.
Senator Ervin. Counsel will call the first witness.
Mr. O'Leary. Mr. Chairman, the first witness is the Honorable
Thomas H. Kucliel, former Senator from the State of California.
Senator Ervin. Senator, we are delighted to welcome you to the
subcommittee.
STATEMENT OF THOMAS H. KUCHEL, ESQ., FORMER U.S. SENATOR
FROM THE STATE OF CALIFORNIA; PARTNER, WYMAN,
BAUTZER, ROTHMAN & KUCHEL, WASHINGTON, D.C., ACCOM-
PANIED BY EDWARD WEINBERG, ESQ., PARTNER
Mr. KucHEL. Thank you, sir ; I am honored to be present with you.
Mr. Chairman and members of the subcommittee, my name is
Thomas H. Kuchel. I am a partner in the law firm of Wyman,
Bautzer, Eothman & Kuchel. Our Washington, D.C., offices are
located at 1211 Connecticut Avenue NW., I am accompanied here
today by one of my partners, Mr. Edward Weinberg.
We represent the National Basketball Association and the Ameri-
can Basketball Association, who ask the Congress for authority to
merge into a single, expanded professional basketball league. S. 2373,
upon which this hearing is held, authorizes such a merger.
In considering that bill, we respectfully submit the Congress will
decide whether professional basketball as we know it today will
flourish or will fail.
The business of professional basketball is in deep economic trouble.
INIany of the teams in the two leagues are consistent money losers.
It is unrealistic to expect that owners will continue to subsidize them
regardless of economic considerations. It is unrealistic to believe
that the laws of economics will be permanently ignored.
The National Basketball Association itself arose out of two sepa-
rate leagues, the National Basketball League and the Basketball
Association of America, which themselves found in the late 1940 s
that they could not survive separately in the face of rising costs and
a bidding war. The surviving remnants in 1948 joined into a single
league in which within a year or two a considerable number of those
remnants failed. That pattern was repeated by the All-America
Conference in football, organized in 1946, which collapsed in 1950
after 4 years with only three franchises surviving. They joined the
National Football League. And only the congressionally approved
merger of the National Football League and the American Football
92
League prevented that dismal football history from repeating the
same downward trend. We respectfully allege to you that a basket-
ball merger alone can preclude professional basketball from again
facing the economic chaos of its earlier days.
Without enabling legislation, the two leagues are effectively pre-
cluded from uniting into a single league because of the risk of
injunctive action and treble damage liability under the antitrust
laws. The hazard of litigation posed by those laws was itself one
of the factors which prompted this committee, and subsequently the
Congress, to approve the proposed football merger in 1966. Senate
Report No. 1654, 89th Congress, second session, 3, 1966.
And in the case of professional basketball, the hazard is not merely
hypothetical. A lawsuit, Robertson et at. v. National Baskethatl
Association et al.^ 70 civ. 1526 (S.D.N. Y. 1970), has been filed seeking
to prevent the merger. A preliminary injunction issued ]May 4, 1970,
prohibits its consummation. The injunction, however, expressly and
understandably recognizes the constitutional right of the two leagues
to petition Congress for merger legislation. And, by seeking ap-^
proval of the bill before you, the two leagues exercise their guaran-
teed right of petition.
There is, however, a further factor which makes merger legisla-
tion a practical necessity. It is quite possible that at the end of long
and costly litigation, the Supreme Court would hold that an agree-
ment by the two leagiies to merge is not a violation of the antitrust
laws. Meanwhile, the ever-escalating bidding war, which merger alone
can halt, would have done its deadly work. The reprieve, I am afraid,
would arrive after the execution.
Professional league basketball asks of Congress only that which
is essential now. It needs, ISIr. Chairman, and S. 2373 would author-
ize, a narrowly drawn exemption from the antitrust laws. The simple
act of merger, by which the two leagues combine into a single league,
would be exempt and that is all.
Basketball, under this bill, would receive nothing more than that
minimum authority to merge which this committee and the Congress
granted professional football in 1966. Of that authority, this com-
mittee said when it favorably reported the football merger legislation,
and I quote your report :
It is the intent of the committee that the new league will commence opera-
tion with no greater antitrust immunity than the existing individual leagues
now enjoy. The sole effect of this legislation,
said your committee
Is to permit the combination of the two leagues to go forv»'ard without fear
of antitrust challenge based upon a joint agreement between the member
clubs of two leagues to combine in a single league and to conduct their affairs
as members of a single league.
And that, Mr. Chairman, is precisely what we would hope would
remain the intention of this committee in considering the basketball
merger bill.
Basketball today is the only major professional sport which
operates through two wholly independent leagues. It has the widest
geographical distribution of any professional league sport in the
Nation. The 28 teams of the two leagues bring major league compe-
tition to 40 cities in 23 States.
93
However, unless merger is promptly consummated, it is my belief
that a substantial number of franchises may fail. After the inevitable
shaking out and shrinking down, professional league basketball
would be confined to a relative handful of the largest cities in the
land. That state of affairs would be to the detriment of the basketball
fans of America, and of the players, many of whom would no longer
have any opportunity to be a part of this great sport, and of the
clubs, both those which would remain and those which would dis-
appear.
Mr. Robert Nathan, a well known and respected gentleman, a lead-
ing American economist, has studied the economic aspects of both
professional basketball and professional baseball. He will present in
detail his carefully considered professional view of the economic
urgency for the merger. He will demonstrate that loss, substantial
loss, has been the consistent pattern in professional league basketball.
A recent magazine article says that, of all team sports, basketball
has the worst financial problems.
The conditions presently confronting professional basketball result
from the annual rites of self-destruction between the two leagues.
Teams are quite literally forced, by the need to maintain major
league status, to bid against each other annually for those college
players entering professional ranks with reputations as potential
superstars. The yearly bidding war with its fantastic contracts for a
limited number of untested rookies- — contracts which bear no rela-
tionship whatever to basketball economics — will inexorably end in
ruin. Yet neither league can unilaterally retreat from that war, for
to do so would be equally ruinous to it.
In these circumstances, balanced competition, the very essence of
professional league sports, becomes impossible. The rich teams become
richer in talent and revenue while the poor teams get poorer and
face collapse.
An end to the bidding war will do awaj^ with the astronomical
contracts entered into each year with new and untested players. It
will bring economic stability to the sport. Merger will enhance pro-
fessional basketball job opportunities. It will promote the develop-
ment of strong local ties with consequent enlarging fan loyalty. It
offers the best prospect of substantial improvement in the pension
and other fringe benefits for the ABA players. Player benefits gen-
erally will be allocated, it seems to us, far more equitably.
]Mr. Chairman, I turn now to a matter in w^hich this committee is
keenly interested : the relationship between the players and the clubs.
Professional basketball recognizes its responsibility to the players.
Two groups, the players and the clubs, must work together in har-
mony if this ]5rofessional sport is to have the enthusiastic endorse-
ment of the third, and most important group, the public, withoiit
which there can be neither players nor clubs. We believe that this
legislation is in the interest of the American public, as well as in
the interest of every segment of the sport itself.
We regret very, very much, Mr. Chairman, that at this point this
morning, players are divided about the merger legislation. In the
main, pla^^er opposition, if we understand the matter correct! v, is
not directed to the issue of merger as such. Eather, that opposition,
we believe, involves issues relating to the movement of free agents.
78-465 — 72— pt. 1 7
94
These are important issues. I believe that we can demonstrate to this
committee that the NBA has proposed a most reasonable resolution
of them. But important as the issues involving free agents may be,
they are surely secondary to the issue of survival. That is the urgency
of the merger bill. If 10 or 12 clubs, or more, were to disappear by
reason of present conditions, player opportunity would disappear in
the same proj)ortion.
Professional league basketball is a highly organized industry in the
labor relations sense. Under the protection and guidance of the Na-
tion's labor relations laws, each of the players' associations, the NBA
Players Association and the ABA Players Association, is a labor
union. Each functions as the recognized collective bargaining agent
for all the players in its league regarding terms and conditions of
employment, except, understandably and as a result of agreement,
for individual salaries which are negotiated directly by each player
with his club. The merger will strengthen the collective bargaining
power of the players. Without doubt, the two players' associations
will become a single, industry-wide bargaining imit.
The National Basketball Association has informed the NBA Play-
ers Association that, subject to players' association approval, NBA
clubs will no longer exercise their contract right to reduce the salary
of a player who is playing out his option. Under the existing uniform
player contract, a club may reduce the salary of such a player by as
much as 25 percent in the option year. Thus, there will be no reduc-
tion in salary during the term of a pla^'er's contract, including his
option year.
The ABA standard player contract authorizes a 10 percent rather
than a 25-percent reduction for the option year. Mr. Wendell Cherry,
chairman of the ABA Merger Committee, has informed me, and
will so testify before you, that there is no doubt that the ABA clubs
will promptly adopt precisely the same principle.
I wish to emphasize to this committee, Mr. Chairman, that there
is no reserve clause of any character in professional league basketball.
The classic definition of a reserve clause given to the Congress
years ago by the then Assistant Attorney General of the United
States, Victor K. Hansen, in a 1957 appearance before the Plouse
Judiciary Committee, is that it is a clause in the contract which
gives the club holding the contract an exclusive, perpetual option
on the player's services, implemented and reinforced by rules under
which all clubs agree not to employ a player under reservation to
another club.
That type of clause and that kind of rules do not exist in either
professional basketball league. Article 22 of the NBA uniform player
contract permits the club employing a player but one single exercise
of an option to renew and that for 1 year only. If the option to renew
is exercised by the club, at the conclusion of the option year the
player is a free agent. The NBA has so informed the NBA Players
Association.
In article 15 of the ABA uniform player contract, it is expressly
stated that a club has but one option to renew and that for 1 year
only.
In this respect, professional league basketball differs from pro-
fessional baseball, which does use a reserve clause. The Supreme
Court has not had occasion to pass on the status of the reserve clause
under the antitrust laws. As the committee well knows — the chairman
has alluded to it — in 1922 in Federal Basel)all Club of Baltimore v.
National League of Professional Baseball Clubs, 259 U.S. 200, the
Court held that Congress had not intended the antitrust laws to be
applicable to baseball. In Toolson v. Neiv York Yankees, 346 U.S.
356— (1953)— the Court stayed with its 1922 decision.
In the recent case of Flood v. Kuhn, 443 F. 2d 264 (2 Cir. 1970),
the circuit court of appeals held that Federal Baseball and Toolson
were controlling as to baseball. A petition for certiorari is now before
the Supreme Court. 40 U.S.L.W. 3036 (U.S., July 6, 1971) (No.
71-32).
Meanwhile, as the committee also knows, the Supreme Court has
held that professional football and professional boxing are subject
to the antitrust laws. Radovich v. National Football League, 352 U.S.
445 (1957) ; United States v. Intermational Boxing Club, 348 U.S.
236 (1955). Although the Supreme Court has not had occasion to
rule on the applicability of the antitrust laws to basketball, several
lower Federal courts have held the antitrust laws to be applicable.
There is no basis for concluding that the Supreme Court would hold
differently.
Mr. Chairman, the NBA, by letter dated September 2, 1971, made
a five-point offer to the players' association regarding the option
clause in its contracts. This committee should know of that offer.
A copy of the entire letter is attached to my statement, and I will
ask that it be inserted in the record.
(Testimony resumes on p. 97.)
National Basketball Association
September 2, 1911.
Lawrence Fleischer, Esq.,
A^ew York, N. Y.
Dear Mr. Fleischer: By this letter, the National Basketball Association
states in detail an offer embracing proposals heretofore made to the NBA
Players Association through you as its representative, as clarified hereinafter.
The proposals relate to Article 22 of the NBA Uniform player contract.
Preliminarily, permit me to advise you of a decision reached by the Board of
Governors and independent of this offer. Subject to approval by the Players
Association, which we assume will not be withheld, when a club exercises its
option to renew an existing contract, the authority reserved therein by the
club to reduce the compensation for the option year by as much as 2,5 percent
will not be exercised. The compensation during the option year will remain the
same as for the preceding season, and the provision in Article 22 permitting a
reduction of up to 25 percent in compensation payable during the option year
will be omitted from future player contracts.
Further permit me to advise you that it is the position of the NBA that
Article 22 permits but a single exercise of an option to renew for one year,
and that the contract if so renewed carries with it no further option to
renew. NBA interprets Article 22 to mean that if a player plays out his option
year, he is a free agent.
On behalf of NBA, I now set out the following five-point offer to the NBA
Players Association :
1. The term of a rookie contract shall be for one year with an option in the
club to renew the contract for a single additional year at no reduction in com-
pensation unless the club and the player involved agree on a longer term.
2. No option provision will be included in future contracts with veterans. A
veteran is a player whose rookie contract has expired.
3. The option provision will remain in existing contracts.
4. Until the player has played the last game (including the last playoff game,
if applicable) of the last season covered by his contract (and the option year,
if any), he may not negotiate, or discuss terms of employment, with any club
other than his own employer. Before a free agent whose contract has expired
signs with another club, the former club, by meeting the highest offer made to
the player, shall have the right to retain such player and sign him to a new
contract.
5. If a player who has become a free agent by reason of the expiration of
his contract signs with another club, a limited compensation shall be paid by
the signing club to the club to which the player was formerly under contract,
such compensation to be determined under the following procedures and princi-
ples :
A. A three-member arbitration panel shall be established to which all sucli
compensation cases shall be referred. The NBA Players Association and the
Commissioner shall each select one member and the two members so selected
shall select the third member, who shall chair the panel. In the event the
third member is not agreed upon within 30 days, the third member shall be
selected by the President of the American Arbitration Association. A vacancy
in the panel shall be filled by the appropriate appointing authority.
B. In the determination of compensation, the following principles shall
govern :
1. Impact of the transfer of the player upon the attendance and revenues
from all .sources of the club to which the player involved was under con-
tract (the former club).
2. Imiiaet of the transfer of the iilayor iipon the competitive ability of
the former club.
3. Evidence of any special costs incurred by the former club, such as
unusual and exceptional promotion activities designed to enhance the
value of the player to the club.
4. The arbitrators shall not consider the difference between the level of
contract payments to the player by the former club and the level of con-
tract payments to be paid him by the club with which he has signed.
5. The arbitrators sliall not award compensation so substantial as
materially to discourage the movement of players from one club to another.
C. A compen.sation award by the arbitration panel, arrived at by the applica-
tion of the foregoing principles, may be in the form of money, draft choices,
assignment of player contracts, or any combination thereof as the decision
specifies.
D. A decision of a majority (two) of the arbitrators shall constitute the
decision of the arbitration panel. However, in the event a majority of the
arbitrators are unable to agree, the determination of the neutral arbitrator
shall constitute the arbitration decision.
E. The expenses of each case shall be borne equally by the two clubs.
The arbitration plan is designed to help maintain balanced competition
among highly motivated and skilled teams. Balanced competition is the single,
most important element in fan appeal. Without a widespread public demand
for the sport, there can be neither clubs nor players. Conditions reasonably
designed to foster balanced competition are, therefore, the legitimate concern
of the general public as well as the clubs and the players.
The arbitration plan is important to balanced competition. Its aim is to pro-
vide a reasonable ni«asure of compensation for the loss suffered by a club and
by its remaining players and by its fans, if top stars sign with another club.
But the arbitration plan does not seek that aim at the expense of a player's
right, upon the expiration of his contract, to bargain freely for benefits com-
mensurate with his ability. It bans the award of compensation to the former
club at a level so high as to discoui-age the movement of players; and it
excludes market value as an element of that award. It is, therefore, a reason-
able step toward maintaining basketball as America's most widespread, major
professional team sport.
I need not emphasize something that both you and the members of the
Players Association know, namely, the importance which NBA places on a
merger of the two leagues. That and the draft are necessary elements to the
preservation and growth of professional basketball as a highly competitive
fan-oriented sport. Important also is the arbitration plan. Without these ele-
ments the public, the players and the owners will ultimately suffer by a weak-
ening of the attractiveness of the sport. We, therefore, urge the Players
07
Association to consider this offer in tlie serious spirit in which it is tendered.
While we liope to pursue tliis offer with you at once, tliere can, of course, be
no final agreement until we know the direction in which Congress is moving
on the merger issue.
I am prepared immediately to discuss each element of this offer further
with you.
May I have your early response.
Sincerely yours,
Edmund S. Nisn,
Chairman NBA Negotiating Committee.
In brief, the NBA offer recognizes the right of each player, upon
the expiration of his contract, to bargain freely with all clubs for
benefits commensurate with his ability. At the same time it recognizes
the legitimate interests of the club, with whom tlie player has been
under contract, and the legitimate interests of the remaining players
and the fans. It seeks to accommodate both the principle of balanced
competition and the right of each player to seek to better himself.
Let me summarize that offer :
First, rookie contracts would be for 1 year with an option in the
club to renew for 1 additional year, unless the club and the rookie
agree on a longer term.
Second, the option clause would be omitted from all future con-
tracts with veteran players.
Third, the option clause would remain in existing contracts but
would be dropped, as I have said, from succeeding contracts.
I do not believe there is any substantial disagreement with the
NBA Players Association over the above three points, as such.
Fourth, before a free agent whose contract has expired signs with
another club, the former club could retain his services by meeting
the highest offer made to him. This is referred to as a "right of first
refusal." We believe it is a reasonable provision in view of the
importance a given player may be to his team.
Fifth, if a player whose contract has expired does sign with
another club, the former club would receive compensation from the
club with which the player has signed. This compensation would be
determined by an independent three-man arbitration panel, in whose
selection the players would participate equally with the league. The
compensation might be in the form of money, draft choices, assign-
ment of player contracts, or any combination thereof as the panel
might decide.
In the determination of compensation, the arbitration panel would
be governed by the following principles :
(1) Impact of the transfer of the plaj^er upon the attendance and
revenues from all sources of the club to which the player involved
was imder contract, the so-called former club.
(2) Impact of the transfer of the player upon the competitive
ability of the former club.
(3) Evidence of any special costs incurred by the former club,
such as unusual and exceptional promotional activities designed to
enhance the value of the player to the club.
(4) The arbitrators shall not consider the difference between the
level of contract payments to the player by the former club and the
level of contract payments to be paid him by the club with which he
has signed.
98
(5) The arbitrators shall not award compensation so substantial
as materially to discourage the movement of players from one club
to another.
Mr. Chairman, I emphasize that the arbitration panel would be
completely independent. I emphasize, too, that the guidelines for
determining compensation would ban the award of compensation to
the former club at a level so high as to discourage the movement
of players.
The aim is to provide a limited measure of compensation if a top
star were to sign with another club. Let there be no doubt that when
that happens, it is not simply the former club which suffers. The
players who remain with that club are surely losers, and so are the
fans of that club. A single player in a sport like basketball can mean
tlie difference between a championship team and an also-ran. The
loss of a single top player crucially affects his teammates and their
future.
As of today, the representative of the NBA Players Association,
I regret to sa;/, has rejected the five-point offer. I hope it will yet be
the subject of further negotiation because we believe, ISIr. Chairman,
that this disagreement should be resolved through the use of the
collective bargaining mechanism. That is what the labor laws are
for. However, as I said earlier, and on that note I conclude, what
is absolutely vital to the players and the clubs now is the preservation
of professional basketball as the nation's most widespread spectator
sport.
For professional basketball to continue in that role, for profes-
sional basketball to furnish the widespread and lucrative employment
opportunities to players that it does today, for professional basket-
ball to continue to satisfy the nationwide public desire for the sport,
approval by the Congress of the simple merger bill is essential.
First things should come first. We most respectfully ask this
committee to approve S. 2373. Congressional enactment of the merger
bill will provide the firm foundation which professional basketball
must have if it is to serve well America's sport fans and its own
people.
Mr. Chairman, that concludes my prepared statement. I would
like to offer for the record two documents. One is a paper we have
prepared dealing somewhat more extensively with the considerations
making merger legislation a necessity. The other is a copy of the
merger agreement between the leagues, dated May 7, 1971.
Mr. KucHEL. I wanted also to include the text of the letter which
was sent by the NBA to the players. (See p. 95.)
(Exhibits follovv'. Testimony rcsu]rLe3 on p. 106.)
Agreement
THIS AGREEMENT is made as of May 7, 1971 between the NATIONAL
BASKETBALL ASSOCIATION ("NBA") acting for and on behalf of each of
its memlter teams (hereinafter collectively referred to as the "NBA") and the
AMERICAN BASKETBALL ASSOCIATION ("ABA") acting for and on
behalf of each of its member teams (hereinafter collectively referred to as the
"ABA").
WHEREAS, there is an action pending in the United States District Court,
Southern District of New York, entitled Oscar Robertson, et al. v. National
Basketball Association, et al. (70 Civ. 1526), in which an order was signed on
May 4, 1970, which, among other things, enjoins the NBA and the ABA from
99
effectuating a combination of the leagues pending a trial of such action, but
which permits them to meet among themselves and with others to discuss and
agree upon a proposal of merger, consolidation, acquisition or combination
between the NBA and the ABA and their member teams for the purpose of
petitioning Congress for an exemption from the antitrust laws with respect to
such proposal ; and
WHEREAS, it is the purpose and intention of the NBA and the ABA at all
times to act in compliance with the terms of such order ; and
WHEREAS, the NBA and ABA desire to associate together for the purpose
of petitioning Congress to enact legislation whereby the NBA and ABA would
be permitted to combine their operations in an expanded single league ; and
WHEREAS, the formulation and implementation of such a petition requires
agreement between the NBA and ABA as to certain terms and conditions
governing their operations iipon the enactment of the exempting legislation ;
NOW. THEREFORE, it is agreed as follows :
1. Definitions. — For purposes of this Agreement, the terms set forth in this
paragraph shall have the following meaning :
(a) "NBA Teams" shall mean the Atlanta Hawks (Atlanta, Georgia), Balti-
more Bullets (Baltimore, Maryland), Boston Celtics (Boston, Massachusetts),
Buffalo Braves (Buffalo, New York), Chicago Bulls (Chicago, Illinois), Cin-
cinnati Royals (Cincinnati, Ohio), Cleveland Cavaliers (Cleveland, Ohio),
Detroit Pistons (Detroit, Michigan), Los Angeles Lakers (Los Angeles, Cali-
fornia), Milwaukee Bucks (Milwaukee, Wisconsin), New York Knickerbockers
(New York, New York), Philadelphia 76"ers (Philadelphia, Pennsylvania),
Phoenix Suns (Phoenix, Arizona), Portland Trailblazers (Portland, Oregon),
San Diego Rockets (San Diego, California), San Francisco Warriors (San
Franciso, California), Seattle Supersonics (Seattle, Washington), which teams
have heretofore been engaged in presenting professional basketball in their
respective cities under the existing or amended Constitution and By-Laws of
the NBA ;
(b) : "ABA Teams" shall mean the Carolina Cougars (Charlotte, Raleigh
and Greensboro, North Carolina and Columbia and Greenville, South Carolina),
Texas Chaparrals (Dallas, Lubbock and Fort Worth, Texas), Denver Rockets
(Denver, Colorado), Indiana Pacers (Indianapolis, Indiana), Kentucky Colonels
(Louisville, Kentucky), Memphis Pros (Memphis, Tennessee), The Floridians
(Miami, Tampa, Jacksonville and West Palm Beach, Florida), New York
Nets (New York, New York), Pittsburgh Condors (Pittsburgh, Pennsylvania),
Utah Stars (Salt Lake City, Utah), Virginia Squires (Hampton, Norfolk,
Richmond and Roanoke, Virginia), which teams have heretofore been engaged
in presenting professional basketball in their respective cities under the exist-
ing or amended Articles of Incorporation and By-Laws of the ABA.
2. Merger Committees. — The NBA and ABA herewith appoint and at all
times agree to maintain during the term of this Agreement separate legisla-
tion committees to be known as "Merger Committees" (each of v;hich shall be
composed of not more than 5 persons) with the full authority given them in
this Agreement and under the constitution and by-laws of their respective
Associations to meet from time to time and take such actions as are necessary
to implement the plan as described and defined in paragraph 5 (the "Plan").
Such committees shall initially be composed of the following: for the ABA—
Bill Daniels, Richard P. Tinkham, Jr., Robert Carlson, Robert Folsom,
Wendell Cherry ; for the NBA— Sam Schulman, Ned Irish, Abe Pollin. Herman
Sarkowsky and one other to be named by the NBA. Each Board of Governors
shall have the power to change the composition of its merger committee at
will. Without limiting the generality of the foregoing, the Merger Committees
are specifically empowered to do the following :
(a) Take all necessary steps, hire all personnel and commit whatever monies
that are necessary to accomplish the purposes set forth in paragraphs 3 and 4 ;
and
(b) In their sole discretion, determine whether or not to meet further wich
representatives of the NBA Players' Association in an effort to negotiate a
settlement of all matters arising from said action entitled Robertson, et al.
V. NBA, et al. If the Merger Committees determine that such meetings_ are
desirable, the Merger Committees are empowered to conduct such meetings.
Such action, however, shall be settled only on terms approved by the Board of
Governors of the NBA and the Board of Trustees of the ABA. All obligations
of this Agreement shall survive and subsist notwithstanding the failure of
100
either or both Associations to approve any settlement of such action which may
be recommended by the Merger Committees.
3. Submission. — The NBA and the ABA througli their Merger Committees,
promptly will submit to tlie current and successive sessions of Congress
through the calendar year 1973 such legislation as is reasonable and appropri-
ate to permit the NBA and the ABA to combine their operations in an
expanded single league with a common draft (hereafter called "exempting
legislation").
4. Legislative Counsel. — The Merger Committees jointly will retain the
services of all representatives deemed necessary or appropriate by them to
direct: (a) the submission of the exempting legislation described in para-
graph 3 above to Congress; (b) the participation of personnel from the two
leagues in such submission; and (c) all other lawful steps necessary to secure
the enactment by Congress of such exempting legislation. Upon agreement by
the Merger Committees, said representatives may retain the services of addi-
tional counsel and consultants to assist in such submission and may agree
upon a single individual to coordinate and direct all the activities which relate
to the legislative effort. All costs and expenses incurred or resulting, directly
or indirectly, by reason of anything relating to the foregoing shall be shared
equally by the NBA and ABA.
5. Plan. — The ABA and NBA agree to the following :
(a) Granting of Fi-anchisc. — The NBA Teams will, consistent with the
present Constitution and By-Laws of the NBA, take such steps as may be
necessary to cause the NBA, as the surviving expanded single league, to grant
promptly to each of the ABA Teams signing this agreement an NBA franchise
under such trade name as shall be approved by the NBA Commissioner for
the cities in which they are located, effective prior to the first full playing
season following the passage of the exemjjting legislation, except that in the
case of the New York Nets, the territory for which such franchise is granted
shall be co-extensive with the then territory of the New York Knickerbockers.
(b) Payment. — Each of the ABA Teams (except the Virginia Squires) sev-
erally, but not jointly, will pay to the NBA Teams as a group the .sum of
$1,250,000 in installments without interest as is more fully set forth in this
paragraph 5(b). The first such installment shall be payable upon the NBA
Teams' granting of NBA Franchises to the ABA Teams pur.suant to paragraph
5(a) and shall be payable $62,500 by each of the ABA Teams (except the
Virginia Squires) (hereinafter referred to as the "First Payment"). The sec-
ond payment shall be in the amount of $62,500 per ABA Team (except the
Virginia Squires) and shall be payable upon the signing of the first network
television agreement or agreements by the single expanded league (hereinafter
referred to as the "Second Payment"), but in no event, however, shall the
Second Payment be made later than May 1, 1973. The balance of the payments
by each of the ABA Teams (except the Virginia Squires) shall be paid in nine
equal annual installments of $125,000 commencing one year from the date of
the Second Payment. At the time of the First Payment, each of the ABA Teams
(except the Virginia Squires), as security for their respective obligations under
this paragraph, will execute and deliver appropriate documents in order to
create in the NBA or its designees a valid and enforcealile security interest
in all player contracts held by such ABA Teams. In the event of a default in
any payment required under this paragraph 5(b). the enforcement of any
security interest shall be subject to the provisions of the then current constitu-
tion and by-laws of the single expanded league. As further security for the
respective obligations of each ABA Team under this paragraph, the NBA may
withhold from any amount payable to an ABA Team with respect to any NBA
network television contract, any amount then due from such ABA Team under
this paragraph which has not then been paid.
(c) Network. Television. — No ABA Team will be entitled to any share of any
NBA proceeds from network television received with respect to any game
played during the 1971-1972 or 1972-1973 season nor, in any event, with respect
to any game played before exempting legislation takes effect. All proceeds
from network television received with respect to all periods subsequent to the
enactment of exempting legislation by Congress will be shared equally among
all members of the expanded single league ; provided, that such sharing shall
in no event occur prior to the completion of the 1972-1973 season. The struc-
ture of the Plan, so far as is practicable, will permit the NBA and ABA to
enter into separate network television contracts until the expanded single
league comes into being.
101
(d) Scheduling. — Commencing with the first full season subsequent to the
first common draft pursuant to subparagraph (e) of this paragraph 5, each
NBA Team will play at least two games (one home and one away) with each
of five ABA Teams, such games to be rotated through such season and, if
necessary, through the following season, provided, however that such games
will not be played if the NBA's current contract with the American Broad-
casting Company precludes them. For the purpose of this Agreement, the
Merger Committees shall make such determination, and, in addition, the
Merger Committees are empowered to meet and resolve with American Broad-
casting Company any controversy which may arise with respect to the playing
of such NBA-ABA games. Nothing in this agreement shall be construed to pre-
vent any NBA Team from scheduling as many pre-season exhibition games
with ABA Teams as is practicable, commencing with the first full season
following execution of this agreement. No such exhibition games, however,
will be played in the territory of a non-participating team without its con.sent.
Subsequent to the passage of exempting legislation there will be at the earliest
practicable time a post-season game or games between the champion NBA
Team and the champion ABA Team. With re.spect to any such post-sea.son
game or series of games between the champion NBA Team and the champion
ABA Team taking place before any joint sharing of television proceeds pursu-
ant to 5(c) above, all television proceeds received from such game or series of
games shall be divided equally between the NBA and the ABA. It is contem-
plated by the parties that, as soon as practicable after the passage of exempt-
ing legislation, a fully integrated schedule will be played by all NBA Teams
and ABA Teams but in no event shall such play be later than the beginning of
the third full year following the taking effect of exempting legislation.
(e) Common Draft. — Subsequent to the taking effect of exempting legislation
and until after the first fully integrated schedule to be played by all NBA
Teams and ABA Teams, all player drafts by the NBA or ABA will be held on
a common basis in accordance with the then NBA By-Laws and otherwise in
the manner described in this paragraph. The procedures to be employed in
such common drafts will require that the NBA and ABA flip a coin to deter-
mine which Association will have the first draft choice. Within each of the
respective Associations, the teams will draft in inverse order determined by
reference to their won and lost percentages immediately prior to such drafts.
The draft picks will alternate between the NBA teams and ABA Teams after
determining who should draft first as set forth above until all eleven ABA
Teams and eleven NBA Teams have had a first round draft choice. The
remaining six NBA Teams will then make their first round draft choices
before the second round commences. The second and succeeding rounds of
each draft will be conducted in the same manner except that, in even-num-
bered rounds, the Association which lost the fiip of the coin will choose first.
Future drafts v»'ill be conducted in like manner, until a fully integrated
regular season schedule is played, after which the draft will be held in accord-
ance with the now current NBA By-Laws as the same may be amended by
resolution of the single expanded league.
(f) Rules Committee. — Contemporaneously with the taking effect of the
exempting legislation, the rules committees of both Associations (each of
which shall consist of an equal number of people) shall meet and promulgate
all rules and regulations relating to the conduct, play and scheduling of games
to be played in the single expanded league. Such rules and regulations shall be
subject to approval by the Board of Governors of the single expanded league.
(g) Multiple Signings. — Where controversies exist on the effective date of
the exempting legislation between NBA Teams and ABA Teams with respect
to claims to rights under respective contracts to the services of a player, it is
agreed that such controversies will be resolved exclusively by the binding
arbitration procedures set forth in this paragraph 5(g), and each signatory
hereto agrees that it will promptly following the effective date of the exempting
legislation dismiss with prejudice any action or counterclaim with respect to
any such controversy then pending against any other signatory hereto.
(i) For the purpo.ses of this paragraph 5(g), a '"Complaining Club" shall be
deemed to mean either an NBA Team which claims that as of the date of this
agreement it has or had rights under a contract to the services of a player
then playing for an ABA Team, or an ABA Team which claims that as of the
date of this agreement it has or had rights under a contract to the services
of a player then playing for an NBA Team ; a '"Respondent Club" shall be
deemed to mean the Team against which such a claim is made.
102
(ii) Within 60 days after the signing of tliis agreement (or in the event of
unavoidable delay or vacancy as soon thereafter as possible) the Commis-
sioners of the NBA and the ABA shall agree upon the selection of an arbitra-
tor or arbitrators to arbitrate controversies under this paragraph 5(g).
Within 5 days after the effective date of the exempting legislation, each
Complaining Club shall file with the arbitrator or arbitrators a written state-
ment of its claim supported by documentation and furnish the Respondent
Club with copies thereof.
(iii) Pursuant to such rules as shall be established by the arbitrator or
arbitrators, the arbitrator or arbitrators shall render a decision with respect
to each such claim no later than 60 days after the effective date of the
exempting legislation.
(iv) The arbitrator or arbitrators will be granted by the combined leagues
a number of first round draft selections not exceeding the number of contro-
versies submitted hereunder (hereinafter referred to as "Bonus Picks") begin-
ning with the eleventh first round pick in the initial common draft described
in paragraiJh 5(e), which shall be deemed amended to permit such Bonus
Picks, one of which he or they may award to any Complaining Club or
Respondent Club in lieu of or in addition to any other relief granted. Any
Bonus Picks so awarded will be made by such Contesting Clubs in the order of
their respective won and loss percentages immediately prior to such common
draft.
(h) The NBA Commissioner will be the Commissioner of the expanded
single league. It is agreed that there will be no change in the length of the
term of the presently existing contract with the NBA Commissioner from the
date this Agreement becomes effective without the concurrence of a majority
of the teams which are signatory to this agreement.
(i) Immediately upon the granting by the NBA of the franchises provided
for in paragraph 5(a) hereof, the ABA will promptly take all steps necessary
to terminate its existence, but any obligation of the ABA shall, nevertheless,
remain the continuing obligation solely of the ABA teams.
(j) In the event any liability should ever accrue with respect to pension
obligations to players based upon tlieir service with an ABA Team in the
ABA, such liability shall be solely that of the ABA Teams which hereby agree
to hold the NBA Teams harmless with respect thereto.
(k) Notwithstanding any provision of the Constitution and By-Laws of the
NBA, it is agreed that, for a period of five years from the date the exempting
legislation takes ticipation in gate receipts (including participation by the
NBA, visiting teams or others) shall be determined by a favorable vote of the
required percentage of the NBA Teams only but shall apply uniformly
throughout the single expanded league.
(1) Notwithstanding any provision of the Constitution and By-Laws of the
NBA, it is agreed that, for a period of one year from the date the exempting
legislation takes effect, there shall be no player transactions between any
ABA Team and any NBA Team.
6. Release and Indemnification. — (a) The NBA and each of its member
teams and the ABA and each of its member teams hereby release and forever
discharge each other and each of such member teams from any claim or cause
of action to the date of these presents including any of the matters, factual
or legal, alleged or referred to in the complaint and counterclaim filed in the
case of American Basketball Association, et al. v. 'National Baskefball Associa-
tion, et al., Number 51055AJZ, in the United States District Court for the
Northern District of California, and neither the NBA nor the ABA or any of
either leagues' member teams shall institute, maintain or prosecute any claims
or causes of action against the other or any past or present officers, directors,
partners, agents or employees of either league or their member teams based
upon any claims, controversies, actions, causes of action, obligations or liabili-
ties of any nature whatsoever whether or not now or hereafter known, sus-
pected or claimed which either league or their member teams ever had. now
have or hereafter can, shall or may have or allege against the other or any
past or present officers, directors, partners, agents or employees of either
league or their member teams with respect to any of the matters, factual or
legal, alleged or referred to in the complaint and counterclaims filed in the
103
above-captioned action. This release, however, shall not operate or be of any
force or effect in favor of any present member of either the NBA or the
ABA who is not a signatory to this agreement and each of tlie parties signa-
tory liereto, notwithstanding such release, expressly reserves any and all rights,
claims and causes of action which it or they liave, may or can have against
any present member of either the NBA or the ABA who is not a signatory to
this agreement.
(b) The parties signatory hereto agree, and it is of the essence of this entire
agreement, tliat each and every one of them will promptly cause the dismissal
with prejudice of their complaint in the action pending in the United Slates
District Court for the Northern District of California, entitled American
Basketball Association, et al. v. National Basketball Association, et al., Number
51055AJZ, but only as against the NBA and those other defendants which
are either (i) present members of the NBA and aLso signatories to this agree-
ment, or (ii) a defendant which has caused the dismissal with prejudice of its
counterclaim in that action as against all present members of the ABA which
ai'e signatories to this agreement ; and will promptly cause the dismissal with
pi-ejudice of the counterclaim asserted in that action, but only as against the
ABA and those other plaintiffs which are present members of the ABA and
also signatories to this agreement. This subparagraph (b) shall be enforceable
by motion or other proceedings in the action itself, or by any other means
available at law or in equity.
Further, the NBA members signatory to this Agreement, severally, agi'ee to
hold the members of the ABA harmless, and the ABA members signatory to
this Agreement, severally, agree to hold the members of the NBA harmless
from any claim or cause of action which may arise from or which could have
arisen from or be a part of the case of American Basketball Association, ct al.
V. National Basketball Association, et al.. No. 51055AJZ, in the United States
District Court for the Northern District of California, and which may be
prosecuted, pursued or claimed by persons, entities or companies which form-
erly were members of either association who are also parties to the captioned
lawsuit and who are not signatories to this Agreement ; and the ABA members
signatory to this agreement, severally, agree to hold the members of the NBA
harmless from any claim or cause of action which may arise from or which
could have arisen from or be a part of the case of American Basketball Asso-
ciation, et al. V. National Basketball Association, et al.. No. 51055AJZ, in the
United States District Court for the Northern District of California, and which
may be prosecuted, pursued or claimed by persons, entities or companies which
may now be members of the ABA who are also parties to the captioned
lawsuit and who are not signatories to this Agreement. Such indemnification
shall include all costs including attorney's fees hereafter incurred by either
Association in defending against such claims as well as any monetary judgment
which might result from the trial or settlement of this cause under the cir-
cumstances described in this subparagraph 6(b).
7. Best Efforts. — Each of the signatories to this Agreement and its successors
agrees that, at least until the end of the calendar year 1973, it will use its best
efforts to procure the passage of the exemptive legislation contemplated by
paragraphs 3 and 4 hereof.
8. If the signatories refuse to comply with the conditions as outlined in
paragraph 7 above, signatories so refusing shall pay to the other Association
an aggregate sum of liquidated damages in the amount of Three Million
Dollars ($3,000,000.00). In no event shall the total sum recoverable by either
Association under this provision exceed said sum of $3,000,000.00
9. In the event one or more provisions of this agreement shall be deemed to
be illegal or unenforceable as in contravention of the aforesaid order of May 4.
1970 in the litigation entitled Oscar Robertson, et al. v. National Basketball
Association, et al., such illegal or unenforceable provision or provisions shall
not affect the validity or enforceability of the remaining and enforceable
provisions of this agreement and the parties hereto agree to amend such illegal
or unenforceable provisions as to conform to the provisions of such order.
10. Execution of Agreement. — This Agreement shall be executed by the Com-
missioners of the NBA and ABA after passage of resolutions by each league
authorizing such execution. Such resolutions shall be passed by a sufficient
104
number of NBA Teams and ABA Teams to bind each league under its respec-
tive constitution and by-laws, it being agreed by the parties that this Agree-
ment shall be a valid and binding contract, the breach of which shall be
cognizable in courts of law and equity and that follovring the execution of
this Agreement, it will not be necessary for either league to take any action,
either before or after the passage of such exempting legislation, to carry out
the purposes set forth in paragraphs 3, 4 and 7 hereof.
11. Governing Law. — This agreement has been signed by the parties in New
York, New York and every provision thereof, including but not limited to
paragraph 5(g) shall be governed solely by the laws of the State of New York.
12. Absent the enactment of the exempting legislation called for by Tara-
graph 3 of this Agreement on or before January 3. 1974, this Agreement shall
terminate on January 4, 1974 and be null and void in all respects.
In witness whereof, the parties have executed this agreement as of the day
and vear first above written.
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106
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Mr. KucHEL. And I would like simply to say that accompanying
us here today, Mr. Chairman, prepared to testify, in addition to
jSIr. Robert Nathan, a distinguished economist, are two outstanding,
distinguished American citizens who are professional basketball
players, Larry Jones of the Floridians of the ABA who, when he
testifies will be accompanied by Mr. Arlan Preblud, the general
counsel of the Players Association of the ABA, and Mr. Eick Barry,
III, of the New York Nets, also of the ABA.
Mr. Jones will speak for the Players Association which has en-
dorsed the legislation and Mr. Barry will give, I think, a highly
persuasive statement to you.
In addition, two owners will testify. Mr. Abe PoUin, the owner of
the Baltimore Bullets, who is chairman of the NBA Merger Com-
mittee, will testify followed by Mr. Wendell Cherry, owner of the
Kentucky Colonels and chairman of the ABA Merger Committee.
And then two distinguished American sports leaders intimately con-
nected with the two professional basketball leagues, Mr. Walter
Kennedy, the commissioner of the NBA, and Mr. Jack Dolph, com-
missioner of the ABA, will sum up the case for the merger bill.
Thank you very much.
Senator Ervin. Senator, do I construe your statement right, when
I conclude that you agree that if the two basketball leagues were to
enter into the agreement set forth in the proposed merger, such an
agreement would constitute restraint of trade in violation of the first
section of the Sherman Act and also would create a monopoly in
violation of the second section of the Sherman Act?
Mr. KucHEL. I am not prepared to agree with you. I tried to
indicate, Mr. Chairman, that the hazard of such a finding by the
courts was one of the compelling reasons to come to the Congress
as the Constitution permits us to do and ask that that simple act of
merger and nothing else be approved, and recognizing that we were
utilizing the precedent w^hich this committee and the Congress have
laid down with respect to the football merger legislation.
107
Senator Ervix. Do you construe the opinion of the district judge
in the Robertson case as at least a statement of opinion of that judge
that the merger of these two leagues would destroy the competition
which the antitrust laws are designed to make secure?
Mr. KucHEL. Again, Mr. Chairman, I am not prepared to agree
with the statement which you just alluded to. It seems to me that
from a standpoint of precedent, what has taken place in the past,
the U.S. Congress did have an opportunity to inquire into that
problem, and it concluded that it would permit the two leagues to
merge.
Here, in basketball, Mr. Chairman, is roughly the same situation
where, because of the practice that is entered into annually, the
fantastic bidding war, clubs today are consistent money losers and
therefore in this area where the business of sports requires a special
consideration by the Congress, we are asking that they be permitted
to merge with no greater immunity from the antitrust laws as a
result of their merger than each of the individual basketball leagues
may have today.
Senator Ervin. Well, at the present time you have the two rival
leagues competing for the services of a person possessing skills in
basketball, don't you? You have two rival leagues
Mr. KucHEL. Yes, sir.
Senator Ervin (continuing). Competing for the skills of the per-
son, services of the person skilled in basketball ?
Mr. KucHEL. Yes, sir.
Senator Er\t;n. When you merge them, you destroy one of the
competitors and leave no competitor.
Mr. KucHEL. No. Mr. Chairman, I think the most forthright way
that the two professional leagues appeal to you is to say that in their
judgment, this committee and the Congress in considering the busi-
ness of sports ought not only to consider the problems of the players
in doing what they wish to do, but consider at the same time that in
team sports, where there are a number of teams in a league, it is
essential that there be a balanced competition.
Senator Ervin. I am discussing questions of law now rather than
economics,
Mr. KucHEL. All right.
Senator Ervin. Now, the judge says in the Rohertson case, patently,
which means obviously or clearly or plainly, and I quote:
Patently, merger or other combination of the National Basketball Association
and the American Basketball Association will eliminate one of two competitors
and leave only one surviving major professional basketball league in the
market of professional basketball in the United States.
Now, isn't that a correct statement?
Mr. KucHEL. It may be. I would like to interpolate, however, Mr.
Chairman, that in the Rohertson case to which you allude, there has
been no trial on the merits. A preliminary injunction was issued by
that Federal district court and that is the extent of the proceedings.
Senator Er\t:n. Yes, but those who control the destinies of the two
basketball leagues decided that they would come to Congress rather
than trust to the courts. It is a question of whether this merger violates
sections 1 and 2 of the antitrust laws.
108
Mr. KucHEL, ISIr. Chairman, the preliminary injunction that is
pending in that lawsuit prevents them from merging but, recognizing
the constitution, informed the two leagues that they might go to
Congress.
Senator Ervin. Yes, they said you can exercise your constitutional
rights, but we granted preliminary injunction on the ground that
there was at least a prima facie case that the action proposed would
violate the antitrust laws. Isn't that correct? If there hadn't been a
prima facie case made, there wouldn't have been any preliminary
injunction granted.
Mr. KucHEL. Well, I don't know what evidence there was but
obviously the complainant did make such allegations. The thing is,
Mr. Chairman, that it seems to me one of the reasons wiiy the
leagues would come to you and your committee, even if there were
no Robertson preliminary injunction, is the hope that this Congress
might approve a simple merger in a much shorter period of time
than a long, costly litigation would consume before there could be a
judicial decision on the subject.
Senator Ervi>s\ Well, in other words, they decided they would
com.e to Congress where laws don't prevail and where laws can be
set aside rather than to trust their cause to the courts where laws
do prevail?
]Mr. KucHEL. Well, you are part of the glory of the American
system, Mr. Chairman.
Senator Ervin. In other words, frankly, I take it at least as an
implied confession that they recognize that there is a very strong —
I am tempted to say probability but I say a very strong possi]:>ility
that if they did what they want to do, they would have violated
sections 1 and 2 of Title XV of the United States Code.
Mr. KucHEL. That certainly is a hazard.
Senator Ervin. Yes. Now, the judge also says this: "It is plain
from the very arguments of the defense counsel," — now, the defense
counsel in tlmt case were the counsel for the legislation — "that these
two competitors for professionals' services are at this very moment
negotiating and taking steps looking to a 'merger', a consolidation, a
combination or an agreement, the net effect of which would be to
eliminate all competition between them."
Now, isn't that the net effect of this merger?
Mr. KucHEL. No, sir.
Senator Ervin. To eliminate all competition between the two
leagues ?
Mr. KucnEL. No, sir.
Senator Ervin. Well, it would merge them all in one league and a
person has some difficulty competing with himself, doesn't he?
INIr. KucHEL. No, INIr. Chairman. I would phrase it differently. I
think that the theory under which teams compete with one another
includes also a recognition that each team has an interest in the
well-being of the other team.
I will give you an example. I am a good Redskin fan. If the
Redskins every Saturday or Sunday afternoon went out and defeated
their rivals 50-60 to 0, I wouldn't be a fan anymore. I say that
because I think that there is a difference in the treatment that the
Government of the United States should give to professional team
109
sports from the treatment it should give to business in the market-
place. The United States Steel Corp., the giants in the motorcar
industry, represent the kind of thing that you are interested in ^^rom
the standpoint of preventing any kind of monopoly, to use your
words, Mr. Chairman, but surely league sports and the teams which
make up a league must be recognized as a little different kind of
subject matter.
For example, today basketball teams have agreed to limit the
number of players each may have. If you tried to apply completely
the antitrust laws, you might contend that that simple act, which is
understandable and necessary, would be a violation of the law, the
law which was designed to apply to business. While I concede 'that
sport IS a business, it is a unique business in which there are, I would
submit to you, Mr. Chairman, other factors for you to take into
consideration.
Senator Ervin. Well, now, I would figure that in basketball, like
most other activities of a commercial nature, that it takes money
to make the mare go, as we would say.
Mr. KucHEL. Takes what?
Senator Ervin. Takes money to make the mare go.
Mr. KucHEL. Yes, sir.
Senator Ervin. Yet with all of the desire to have competition on
an even basis, which generates the demand for money, this mero-er
agreement provides that the home teams are to take all of the gate
receipts^ doesn't it, and not divide it with the team that they played ?
Mr. KucHEL. The merger agreement was entered into as a business
arrangement which both leagues and their members decided was best
for both of them. What you say is true.
Senator Ervin. So there is not going to be much competition, at
least the ability to compete, between a city like Baltimore, for ex-
ample, and a little town like Charlotte, N.C. Charlotte is the biggest
town m my State, but as compared to Baltimore, it is a very small
place — in population only, of course.
[Laughter.]
Mr. KucHEL. My associate suggests, Mr. Chairman, that the Green
Bay Packers are a good example of a highly successful professional
sport operation in a rather tiny town, but I would like to say here
that the teams in both leagues agree that in their judgment the basis
of that merger agreement is good.
Senator Ervin. Pardon the interruption. I understand in football
tJiey share the receipts of the home games, but under the basketball
merger agreement, gate receipts are not shared.
Mr. KucHEL. And I would rather hazard a guess
Senator Ervin. And so the Green Bay Packers on that kind of a
basis would be on a financial equality as far as receipts are concerned
with the team in the biggest city in the football leagues, quite differ-
ent from what is proposed in this merger.
Mr. KucHEL. I would rather imagine, Mr. Chairman, that that
kind of problem is going to be on the agenda for the teams in the
combined league, if you approve the combined league.
_ Senator Ervin. I certainly agree with you because everything that
IS said m this agreement can be set aside by the leagues, by the teams,
the combined leagues.
78-465— 72— pt. 1 8
no
Mr. KucHEL. Surely. . . xi • j?
Senator Ervin. And so there is no protection m this merger lor
the players that cannot be set aside by subsequent agreement it this
bill becomes law
Mr KucHEL. Well, Mr. Chairman, the players have all the rights
and benefits of the Nation's labor laws if you were to approve merger.
Senator Ervin. No, the Nation's labor laws apply to management.
In the industrial field, all the industries cannot get together and say
we will not pay a worker so much. Under the labor laws the union
can negotiate for the highest possible price for any of its workers
and nobody can put a limitation on except the reiusal of the individual
"""Mr"" KucHEL^Mr. Chairman, would it not be true that there would
be true industrywide bargaining if the merger were to become law
and one players association would engage m bargaining with one
^Wenator Ervin. No, there would be a violation of the antitrust
laws for all the steel companies, for example, to get together and say
we are not going to pay above a certain rate as compensation, or we
are not going to allow any man to get employmeiit except m the
ndustry whe?e he is now working. There is a vast difference. In fact,
the difference between this merger and these industries generally,
the distinction is about as wide as the gulf which yawns between
Lazarus and Abraham's bosom and dives m hell.
[Laughter.]
Senator Ervix. They cannot be compared. . ,, , i t
Mr KucHEL. Mr. Chairman, all I want to say is that you and I
both will recall when there was a strike in football last year-I would
submit that what you would be doing is giving the players an addi-
tional measure of vigor in their bargaining if you authorize the
'"senTrERVxr?ou know, this is a peculiar demand As I construe
the Tr-u uent that is made for the merger-for the Congress to
authorize the merger-it is that those who operate these leagues are
tncSe of eSsing restraint on themselves in bidding for players
and tiiat puts^t^^^ in this bad economic state. So they are asking
Con-^ess, since we cannot exercise restraint on ourselves m making
outbids for the services of the players, we are asking Congress to
Xe us the power to exercise restraint on the players It seems to
iie a rathe? peculiar argument. Also, the argument about this merger
behicr a necessity to me" I think the final answer was given the final
answer in 1783 by William Pitt, the younger when he said : "Necessity
is a Dlea for every infringement of human hberty.
The owners say we cannot restrain ourselves; we bid prices for the
services of players which are economically impossible ; therefore we
ask Congress to give us power to restrain the players of their freedoms
Smc^ we abuse o^ur own freedoms, we ask that we begiven anthority to
lestrain the freedoms of the players. I think that is essentially wha.
this demand is based on. . c n v
Mr KucHEL. Mr. Chairman, I most respectfully disagree
Senator Ervin. National basketball has a rule about the strike and
it would be — it says :
Ill
A member whose team for any reason fails to appear or complete any
scheduled game, whether preseason, regular season or playoff, including over-
time, except for causes beyond its reasonable control, shall pay the sum of
$5,000 for each of such games to the member operating the opposing team or
teams and such further compensation and such penalty as imposed by the
Commission or Board of Governors.
That reminds me of the old captain who used to read the articles
of war to his company and he always failed to distinguish between
"and" and "or." Where the article says that a person who commits a
certain offense shall be punished so and so or shall suffer such and
such, suffer death or such action as the court martial prescribes, this
fellow used to read "suffer death and/or such other further punish-
ment as a court martial might prescribe."
[Laughter.]
Mr. KucHEL. Mr. Chairman, I am informed by the very able gen-
eral counsel for the NBA that the provision which you just read
applies to teams and not to an individual player.
Senator Ervin, Maybe the word "members" is used to talk about
the team instead of a member of a team. Is that your point?
Mr. KucHEL. Member of an association is the phrase which means
the owner of the individual team.
Senator Ervin. Now, if this bill is amended, this is a part of an
additional power that the professional basketball clubs would receive.
After the first sentence which deals with the right to bargain to-
gether for telecasting rights.
Mr. KucHEL. That is the law.
Senator Ervix. "In addition such laAvs," — that is antitrust laws,
and incidentally, the antitrust laws are defined in section 12 of Title
XV of the United States Code and this definition covers all antitrust
laws or virtually —
"In addition, such laws," — that is all of the antitrust laws — "shall
not apply to a joint agreement by which the member clubs of two or
more professional basketball leagues combine their operations in an
expanded single league if such an agreement does not decrease the
number of professional basketball clubs so operated and the provi-
sions of which are directly relevant thereto."
Now, that is about as plain English as legal gobbledegook ever
gets and if it means what it says, it means these leagues are entirely
released from all responsibility to perform anything required by
the antitrust laws.
Mr. KucHEL. Mr. Chairman, that is not so. And your committee,
when it adopted a report favoring this legislation without the addi-
tion of the language pertaining to basketball, specifically said that
the intention of the committee was that the new league will com-
mence operation with no greater antitrust immunity than the exist-
ing individual leagues now enjoy.
Senator Ervin. Well, but the antitrust laws virtually don't apply
to individuals. They apply to combinations. Section 1, combinations,
and conspiracies, you have two or more people, and when you make
it one league, you do away with that.
Mr. KucHEL. Mr. Chairman, the language I read was the language
of your committee when you permitted the two football leagues
Senator Ervin. Well, I am not responsible. I didn't draft it. But
I am responsible to determine what this thing means. If it means
112
what it says, Senator, it says in addition to what is in the first section,
"Snch laws shall not apply"— that is antitrust laws— "shall not apply
to a joint a^T-eement by which the member clubs of two or more
professional basketball leagues combine their operations m an ex-
panding single league."
Mr. KucHEL. Mr. Chairman, I have read and reread the congres-
sional history, the legislative history of the football merger legisla-
tion. House and Senate. I don't think there is any question at all that
the football merger applied simply to the act of merger for it was
iterated and reiterated that there would be no greater or lesser im-
munity from the antitrust laws under the combined league than under
the prior two football leagues. Mr. Chairman, we took that bill and
recommended that a very small number of words be added simply
to make it apply to the football merger as well. i • th
Senator Ervin. Well, that is one reason I am opposed to this bil ,
because I Imow what has been done under the football merger bill.
But let me ask you this question in a different way.
If this bill is passed, what provisions of the antitrust laws will
apply to this league ? -, xi ^i
Mr. KucHEL. The same ones that apply today, exactly the same
ones that apply today. _ wi th
Senator Eevix. Well, if that is so, we don't need the bill.
Mr. KucHEL. Because the bill, Mr. Chairman, applied to the foot-
ball mero-er and rather than run the risk of merging m the absenc^
of lesislative approval or taking the time to litigate the matter, both
professional leagues have come to the Congress.
Senator Ervin. Well, Senator, as I say, this is m as plain English
as you can ever find in any legal gobbledegook ; it says that the anti-
trust laws shall not apply to joint agreement made by these two
lea (rues and that means they can do anything under the joint agree-
ment as far as regulation of the legal affairs is concerned m
respect to the plavers. It takes them clear out from under the anti-
trust laws and takes them out from under sections 1 and 2.
Now would you agree to an amendment that would say that this
language of this bill should be amended so as to specifically state
that the common draft and any arrangement for mandatory compen-
sation would not be exempt from the antitrust laws?
Mr. KucHEL. Mr. Chairman, what we did was seek to draft tins
bill in as narrow a manner as possible. We sought, and I think suc-
cessfully, to make it applv to the act of merger and to nothing else.
We conie before this committee saying to you that from the stand-
point of legislative history, we believe the history that you made--
I should say that in a collective sense— your committee made and
the Congress made with respect to the football merger would ht this
situation and that all the laws today that apply to the two leagues
would apply tomorrow if you approved the merger, to the expanded
league, with the exception of the single act of permitting them to
Senator Ervi?^. Well, you have what is in effect a reserve clause
in the football league, don't you? ^ j; ^u ii
Mr KucHEL. I do not recognize— I am not an expert on lootball
and I surely don't want to speak about that subject, but I had be-
lieved that there was no reserve clause in football.
113
Senator Ervin". Well, I don't know that there is any necessity but
to me this says it shall not apply to a joint agreement by which a
merger is made,
Mr. KucHEL. I read the language differently, Mr. Chairman.
Senator Ervix. Well, I would like to know what — this certainly
does — section 1 of the Sherman Act says that it outlaws undue
restraint of trade. This authorizes restraint of trade. The second
section deals with the monopoly. This authorizes monopoly. So I
cannot see any other provision of the antitrust laws that would have
any application as far as relationship between the owners and the
players is concerned.
Mr. KucHEL. ]Mr. Chairman, so that we may understand each
other, the law today goes on to state, as you read several moments ago :
The antitrust laws as defined in Section 12 of this title of the Act as
amended shall not apply to any joint agreements by or among persons engaging
in or conducting organized professional team sports of football, baseball,
liasketball or hockey, by which any league or clubs participating in professional
team sports of football, baseball, basketball or hockey contests sells or other-
wise transfers all or any part of the rights of such league's member clubs in a
sponsored telecasting of the games of football, baseball, basketball or hockey
as the case may be, engaged in or conducted by said clubs.
The second sentence in the law today says:
In addition, such laws shall not apply to a joint agreement by which the
member clubs of two or more professional football leagues which are exempt
from income tax under the code section enumerated combine their operations
in an expanded single league so exempts from income tax if such an agreement
increases rather than decreases the number of professional football clubs so
operating and the provisions of which are directly relevant thereto.
All we did, Mr. Chairman, is at the proper place to provide that
the antitrust laws shall not apply also to a joint agreement by which
member clubs of two basketball' leagues, two professional basketball
leagues, combine their operations in an expanded single league. That
is all we did.
Senator Ervin. Well, now, there is some difference. I am not
enough of a tax expert to determine precisely its limits. There is
quite a difference between the amendment by the football leagues and
the basketball leagues because the football leagues don't have to come
under exemption from certain forms of taxation and there is nothing
about anv basketball leagues in this to be exempt from taxation.
Mr. Ktjchel. No, Mr. Chairman, that provision in the present law
relating to the tax status does not apply ; it is not intended to apply,
and in my judgment a clear reading of it indicates that it does not
apply to the basketball merger.
Senator Ervix. That is what I say ; they are not exactly alike, in
other words. There is some distinction which I don't care to argue
about any further. You see, the antitrust laws apply to every con-
tract, combination, in the form of a trust or otherwise, or conspiracy
in restraint of trade. In other words, that necessarily has to be be-
tween two or more persons.
ISIr. Ktjchel. Well, :Mr. Chairman, today, within each of the two
leagues there may well be problems concerning antitrust laws which
the various teams might be exposed to. That would be precisely the
same situation.
114
Senator Ervin. But it wouldn't apply, those antitrust laws wouldn't
apply to any — to get the exact words — joint agreements. In other
words, it says by joint agreement by which you merge.
Mr. KucHEL. But you see, Mr. Chairman, it is not just joint agree-
ment. That phrase "joint agreement" is confined or restricted by the
language which follows it and the language which follows it restricts
it to the agreement to merge.
Senator Ervin. Yes, but really the only limitation on it is that the
agreement must not decrease the number of professional basketball
clubs.
Mr. KucHEL. I would say, Mr. Chairman, truthfully, that what is
being done here today I think conclusively establishes the intention
under which that legislation might be considered.
Senator Eryix. Well, I don't intend to press the point any more
but I would appreciate it if your firm would give us some kind of
synopsis of the provisions of the antitrust laws, the provisions of
sections 1 and 2 of this Act which would still apply which would
be applicable to a joint agreement.
Mr. KucHEL. All right, sir, we shall do that.
Senator Ervin. Fine.
(The requested material follows:)
Wyman, Bautzer, Rothman and Kuchel,
Kovcm'ber 11, 1971.
Wilbur D. Sparks, Esq.,
Assistant Counsel, Suhcommittee on AntHnist <nul Monopnlij Lcgislafinn, L.S.
Senate, Washington, B.C.
Dear Wilbur : I enclose a statement by Senator Kueliel in response to Senator
Ervin's question which appears at page 71 of the transcript of the September 21
hearing on S. 2373. For convenient reference, Senator Ervin's request is here
set out in full :
"Senator Ervin. Well, I don't intend to press the point any more but I would
appreciate it if your firm would give us some kind of synopsis of the provisions
of the antitrust laws, the provisions of Sections 1 and 2 of this Act which
would still apply which would be applicable to a joint agreement.
Mr. Kuchel. All right, sir, we shall do that.
Senator Ervin. Fine."
This completes the transcript inserts called for from us during the first
round of hearings.
Sincerely yours,
Edward Weinberg,
Of Wymanit, Bautzer, Rothman d Kiiehel.
Enclosure.
Response of Senator Kuchel to Senator Ervin's Question at Page 71 of
THE September 21, 1971, Transcript of the Hearing on S. 2373
As I indicated in my testimony, under S. 2373 basketball would receive noth-
ing more than that minimum authority to merge which this Committee and the
Congress granted professional football in 1966. This Committee, in favorably
reporting the football merger legislation, stated :
"It is the intent of the committee that the new league will commence opera-
tion with no greater antitrust immunity than the existing individual leagues
now enjoy. The sole effect of this legislation is to permit the combination of
the two leagues to go forward without fear of antitrust challenge based upon
a joint agreement between the member clubs of two leagues to combine in a
single league and to conduct their affairs as members of a single league." S.
Rept. No. 1654, 89th Cong., 2d Sess. 3 (1966).
I submit that the point of my statement and the answer to your question is
best illustrated by the lawsuit brought in April 1970 by the NBA players
against the two basketball leagues, which lawsuit has been called to your
attention by the testimony of Mr. Ira Millstein, counsel for the Plaintiffs in the
lawsuit.
115
Each of the basketball leagues is today conducting its business by a set of
rules and regulations adopted by agreement among the members of each league.
In their suit, the players allege — as to the NBA — that certain of those rules
and regulations, being the result of so-called "concerted practices and activi-
ties", constitute combinations and conspiracies in violation of the antitrust
laws. The defendants have denied and do deny that they have or are doing
anything illegal.
Thus, for example, it is alleged — and denied — that by conducting an annual
draft of college ball players the members of the NBA, i.e., the individual
teams, violate the antitrust laws. (The ABA also conducts an annual draft
which, presumably, may be similarly attacked.)
If S. 2373 is enacted and the resulting single expanded league conducts a
common player draft, as it is now anticipated it will, the players will still be
able to contend, as we understand them to contend today, that the conduct of
an annual draft by a professional sports league violates the antitrust laws.
Likewise, the expanded league will be able to deny, as the individual leagues
deny today, that a player draft violates the antitrust laws. The bill, if enacted,
will not akect the determination of the legality of a player draft.
This explanation applies equally to every other charge that has been or may
be made based upon the fact that whenever a professional sports league takes
action, it does so by what may be called an agreement among the members of
the league. We think each league, in conducting its business according to rules
and regulations adopted by its members, is acting lawfully. If the bill is
enacted and we are right, the adoption of the same or similar rules and
regulations by the single expanded league will be equally lawful. If we are
wrong, the adoption of the same or similar rules and regulations by the single
expanded league will be just as subject to the antitrust laws as was their
adoption by each league acting separately.
I submit that that is why this Committee was correct in making the state-
ment which I have quoted at the outset of this statement. The sole effect of
this legislation will be to permit the combination of the two leagues to go for-
ward without fear that their mere combination into a single league and the
conduct of their affairs as members of a single league will be challenged under
the antitrust laws. The legislation will not permit the single league to do any-
thing that either one of the individual leagues could not lawfully do today.
Senator Ervin. Now, there is nothing in this merger agreement,
and there is nothing in any proposal which has been made to players,
that would eliminate the common draft of persons possessing skill
in basketball, is there?
Mr. KucHEL. Right.
Senator Ervin. In other words, this would make it legitimate,
something which is now illegitimate under the Sherman antitrust
laws, for clubs to get together. They could survey the field of those
who possess potentialities as basketball players and they could allo-
cate those persons among the clubs and agree that no club except
the club to which such a particular person was allocated, should offer
him a contract.
Mr. KucHEL. Sir, you cannot say that in my opinion because what-
ever problem may exist with respect to antitrust laws and the draft
in each league today is not touched by the merger bill, and, therefore,
any rights on the part of anyone against a "common draft", would
be preciselv the same, neither diminished nor enhanced.
Senator Ervin. Well, if two or three— if a group gets together and
agrees that none of them would employ me to play basketball unless
I agreed to play for only one of them, that would certainly be a
violation of antitrust laws, if this is passed.
Mr. KucHEL. If you are correct, then it is a violation today by
those operating in the two leagues and it would be the same tomorrow.
Senator Ervin. That is the reason they wanted this merger, really.
Mr. KuciiEL. No, sir.
116
Senator ER\^N. Oh, yes. Yes. In other words, they do not want to
bid, they do not want to have to compete for these players, and they
want to take the persons possessing athletic skills and divide them
up and agree that chib A only will offer a contract to player X and
if he does not take the offer from club A, X cannot play in these
Ijasketball leagues. That is exactly what they want this merger for.
Mr. KucHEL. The mechanics of this kind of an operation, Mr.
Chairman, is it not true, are the mechanics of the operation within
the NBA today and ABA today ?
Senator Ervin. If they do it today they are violating the antitrust
laws.
Mr. KucHEL. And if they are doing it today and do it tomorrow,
this merger bill would not affect the correctness or the invalidity,
and by the way, Mr. Chairman, let me go on to say that in this com-
mittee no one should accuse the leagues of violating the antitrust
laws today. There is pending litigation, as you yourself pointed out.
Senator Er\^x. Well, if they are doing that, if they are taking and
surveying the field, and saying that all agree, in a combination or a
contract whereby club A only will bid for the services of X player,
and say X can only work for club A at the price he is offered or he
cannot work at all in this league, they are violating the antitrust laws.
Mr. KucHEL. Sir, I respect you but you utter your opinion on that
matter and there would be disagreement on what you have just said.
Senator Ervin. Well, I happen to have a multitude of Supreme
Court dexjisions on my side of the argument. Well, please explain
how if this bill is passed, by what mechanism are you going to dis-
claim the owners of the clubs from bidding high prices and compet-
ing for the same athletes ? AVliat is the mechanism by which you are
going to do that?
Mr. KucHEL. I want to say first, Mr. Chairman, I bet you do not
have any Supreme Court decisions which spell out any judicial de-
cisions on problems of the common draft. There are none. Obviously,
the combined league would engage in a common draft.
Senator Ervin. Xo, but I have plenty of Supreme Court decisions
that say where a group gets together and make a combination or
contract or enters into a conspiracy to deprive another person of his
capacity to sell either his goods or his services, limit his capacity,
that that is a violation of the antitrust law. That is the reason we
have it, keep those things from happening. Now, I would like to
know — this does not— this merger agreement does not relate to the
common draft. Under it the common draft could be adopted just
like it has been adopted in football, under a similar exemption. IIow
are we goinc: to keep these very anxious owners from bidding high
prices and competing for the services of the best prospective player?
By what mechanism.
Mr. KuciiEL. The merger agreement, Mr. Chairman, which I have
filed with my statement, provides on page 9 for the common draft
and it is not very long. Permit me to read it to you :
Subsequent to the taking effect of exempting legislation and until after tlae
first fully integrated scheduled to be played by all NBA teams and ABA teams,
all player drafts by the NBA or ABA will be held on a common basis m
accordance with the then NBA By-laws and otherwise in the manner described
in this paragraph. The procedures to be employed in such common drafts will
117
require that the NBA and ABA flip a coin to determine which Association will
have the first draft choice. Within each of the respective Associations, the
teams will draft in inverse order determined by reference to their won and lost
percentages immediately prior to such drafts. The draft picks will alternate
between the NBA Teams and ABA Teams after determining who should draft
first as set forth above until all eleven ABA Teams and eleven NBA Teams
have had a first round draft choice. The remaining six NBA Teams will then
make their first round draft choices before the second round commences. The
second and succeeding rounds of each draft will be conducted in the same
manner except that, in even-numbered, rounds the Association which lost the
flip of the coin would choose first. Future drafts will be conducted in like
manner, until the fully integrated regular season schedule is played, afier
which the draft will be held in accordance with the now current NBA by-laws
as the same may be amended by resolution of the single expanded league.
Senator ER^^[N. In other words, under that they can change the
bylaws rehiting to the common draft. Under this language, when you
have the first round, you go around the table and one team
starts off with the first toss and when they make the first
choice all the rest of them especially or impliedly agree they will not
seek the services of the first choice, will not bid for him. That is
exactly what it is designed for. So, the fellow has to take their offer
or he gets no offer.
Mr. KucHEL. Yes, sir.
Senator Ervin. In other words, you just divide the prospective
skills of the players among the different clubs in rotation, just about
like the soldiers guarding the Crucifix divided the seamless robe
of Christ.
Senator Kuchel. That is not a good analogy, ]\Ir, Chairman.
Senator Ervin. AVell, now, you say there is no reserve clause by
which the team can control the future. In this proposal, it appears
on pages 9 and 10, you refer to a free agreement. Now, when a man
first comes into the league and signs a contract, he, of course, has to
stay with the team that first employs him. until his contract expires.
Mr. Kuchel. Yes, sir.
Senator Ervin. And then he is subject to an option for an addi-
tional year, is it not?
Mr. Kuchel. Sir, will you repeat that again?
Senator Ervin. In other words, a man comes in, he signs a contract
for 3 years. He has to stay with the team he signs the contract with
for 3 years.
]\Ir. Kuchel. Yes, sir.
Senator Ervin. Then, they have the option of retaining him
another year, do they not?
Mr, Kuchel, Yes, sir; because he has agreed to that.
Senator Ervin, Yes ; he agreed to it, and then after he stays there
for the time of the contract and for the additional year if the team
wants him, he is declared to be a free agent,
Mr, Kuchel. He is a free agent.
Senator Ervin. But he has got a lot of chains on him, has he not,
for a
Mr. Kuchel, A^liat?
Senator Ervin. He has a lot of chains tied to him after he gets
to be a free agent.
Mr. Kuchel. No.
Senator Ervin. Well, let us see.
118
]\Ir. KucHEL. He has not a lot of chains.
Senator Ervix. Here is a man, a free agent. He has fulfilled his
contract and option exercised, he has fulfilled that. He ought to
be a free American by that time but he would not be. It says here,
"Before a free agent", that is a man who has fulfilled his entire con-
tract, everything is agreed to.
"Before a free agent whose contract has expired" — I am reading
from page 10 of your statement — "signs with another club, the
former club could retain his services by meeting the highest offer
made to him."
Here is a man, for example, plays in Baltimore. He has fulfilled
all of his contract for the Baltimore club and he wants to move to
that Garden of Eden, California, wants to play with Los Angeles.
As long as Baltimore is willing to pay him as much as Los Angeles
has offered him, he has to stay in Baltimore. He is tied to Baltimore,
is he not? The free agent, the man who is ironically called the free
agent. He is tied to Baltimore. Under this offer.
Mr. KucHEL. Under this offer.
Senator Ervin. Which the players
Mr. KucHEL. Under this offer, the former club would have the
right to meet the increase.
Senator Ervin. So, he is not very free. He is still tied back
Mr. KucriEL. Mr. Chairman, this is an offer to the player.
Senator Ervix. Yes.
Mr. KucHEL. The players can put it down the sewer if they want
to. But if they accept it, then in the kind of system or society we
live in, the two groups will have come together into a contract.
Senator Ervix. Yes; he can take his choice between putting the
offer down the sewer and going out of his profession or remaining
tied to the club in respect to Vv^hich he has fulfilled all his contractual
obligations.
Mr. KucHEL. No, sir.
Senator Ervix. He cannot move any place else if that clubs wants
him.
Senator Hruska. Will the chairman yield?
Senator Ervix^. Yes.
Senator Hruska. There is a live quorum. We will have to leave
shortly. But before we do, Mr. Chairman, may I suggest in this
world of ours where we have labor unions everywhere, where are
the free agents when a contract is agreed to between management
and labor? This is what is involved here. If the term free agent is
ironically applied to the situation of Baltimore and Los Angeles,
it is by reason of a contract which that player has entered into and
not by reason of the bill which we are having hearings on today.
Senator Ervix. Well, Senator
My. Kuchel. Absolutely.
Senator Ervix. I will say again that the distinction between the
situation and this is likewise as wide as the gulf which yawns between
Lazarus and Abraham's bosom and dives in hell. Because if that man
doesn't like to work under the contract that the union has negotiated
for him he can go anywhere else in the LTnited States and take any
other job that he gets anywhere in the United States but this man
cannot go anywhere else under this.
119
Mr. KucHEL. But it is an agreement entered into. That is the
situation.
Senator Ervin. Oh, no ; no.
Mr. KucHEL. And that man cannot go to one place from another
without pension, forgetting his pension rights, hospital benefits and
a lot of other things that go with the contract.
Senator Eevix. This man has not made the agreement. He has
already served any agreement he ever made. This is made by some
other people for him. He has no voice in it. Yes, sir. After he is
theoretically and ironically a free agent, he is still tied like a serf
used to be to the lands.
Let us read the next one. Senator, I am sorry, I am going to finish
this pretty quickly, but I do have to go to the live quorum.
Mr. KucHEL. Will you reconvene after quorum, Mr. Chairman?
Senator Ervin. Yes.
Mr. KucHEL. Thank you.
Senator Ervin. Wait a minute. It is almost time to get over to
the roll call vote. It will be about 12:30. We can come back. I told
Senator Hruska I am going to try to finish all the witnesses and
promise I will not be as inquisitive with respect to the other witnesses
as I have been with you.
Mr. KucHEL. Thank you, sir. Mr. Chairman, we do have two
players who will need to "leave and Mr. Nathan is committed to leave
Washington, so it would be a great benefit to us if we
Senator Ervin. I have just two or three other questions but I
expect I had better go. I told Senator Hruska 2:30 p.m. Would
2:30 p.m. suit the witnesses?
Mr. KucHEL. Yes, sir.
Senator Ervin. We will keep in session and try to finish the
witnesses.
Mr. KucHEL. Any chance of — when is your vote?
Senator Ervin. It is going to be in just a few minutes. This is a
quorum call.
Mr. KucHEL. Any chance of
Senator Ervin. By the time we get to call the roll, you remember
how it is, getting all of them in there to answer it takes a little time.
It will be about 12:30 p.m., and about time to unhitch and get some
vittles, as v/e say in North Carolina, it is about time to unhitch.
Senator Hart. Mr. Chairman, are we recessing until 2:30?
Senator Ervin. Yes; we stand in recess until 2:30.
(Whereupon, at 12 :17 p.m., the hearing was recessed, to reconvene
at 2:30 p.m., this day.)
AFTERNOON SESSION
Senator Ervin. I can just go ahead and complete unless someone
wishes to wait until the other senators get here.
The subcommittee will come to order.
THOMAS II. KUCHEL, ESQUIRE, ET AL., RESUMED
Senator Ervin. I was asking you about the provisions here that
are supposed to be substitutes for the reserve clause on alternatives.
Now, under this fourth proposal, on page 10, I will ask you if after
120
the player has fulfilled all the contractual arrangements he agreed
to, he could still be compelled to play for the same club as long as
the same club desires his services and is willing to match any ofl'er
he receives from any other club ?
Mr. KucHEL. Only if in the negotiations, I take it, the players
association were to accept that part of a suggested offer by the NBA;
and I want to make two points, Mr. Chairman :
First, this is part of an offer to be negotiated and, secondly, I do
believe that answers to some of the specific questions might much
better come from those who will testify subsequent to me.
Senator Ervin. Well, anyway, though, anj^ contract that they make
with the players after expiration of that particular contract, owners
can agree as to what terms they are going to offer in the future,
can't they?
Mr. Ktjchel. I would say that such an agreement would be subject
to the same legal requirements under the merged league as it is today
in either or both of the two separate leagues.
Senator ER^^:N. Well, I would have to disagree with you because
I think this gives the stamp of approval to whatever the joint agree-
ment is that may be made.
Mr. KucHEL. ISIr. Chairman
Senator Ervin. And I think the club owners are the ones that make
the joint agreements and the players have nothing whatever to do
with it. I am talking about it as a matter of law.
Mr. Ktjciiel. Mr. Chairman, if this bill were to become law, this
discussion, I take it, and what has already been said, might very well
be relevant to an interpretation of legislative history; and I would
wish to say as vigorously as I can that the bill is intended simply
to authorize the active merger.
Mr. ER^^:x. The provisions of this offer apparently are intended to
tie a player as effectively to his team, his original team, as the reserve
clause in the other contracts.
]\Ir. KuciiEL. Mr. Chairman, again I would say if point four of the
offer, particularly that part to which you refer, is to become a part
of an agreed upon contract, it will never do so unless the players and
their representatiA^es were to agree, and to that extent, Mr. Chairman,
I most respectfully state that it would be like everything else,
negotiable.
Senator Ervin. But if they ever agree to that, they can do like
the man that entered Dante's Inferno when they enter into that
agreement. In other words, this clearlj'^ contemplates that after they
have fulfilled their original contract, they still remain bound nnd
they cannot transfer from one team to another without first the
consent of tlie original team, and no matter how bad a man wants
to transfer, he has to stay there. And then it has got a penalty on the
team hiring him away from the original team. It says :
Fifth, if a player wliose contract has pxpired rloes sign with another clnb,
the former club would receive compensation from the club with which the
player has siened. This compensation would be determined by an independent
three-man arbitration panel in whose selection the players would participate
equally with the league. The compensation might be in the form of money, draft
choices, assignment of player contracts and any combination thereafter as the
panel decides.
121
In other words, the man cannot go to another team after he has
played out his contract as long as his original team is willing to
pay him as much as the other team offers and to keep the other team
from offering him any more, the agreement provides they are going to
be penalized if they offer him more than his home team is willing to
pay him, and they don't even know what punishment or cost is going
to be extracted from them by the arbitration panel if they acquired
the player.
It is sort of like, as I said about the court-martial, that you are
going to be punished by death and such other further punishment
as the arbitrator might impose. They can either penalize them with
an unlimited amount of money; they can penalize them by taking
away the draft choices; they can assign other player contracts or
they can combine all three of these. And nobody outside of the most
gifted prophet that ever existed on this earth would dare to flee
from the ills that he Imows into the ills that he doesn't know.
So this offer contemplates that a player is going to have his future
just as much determined by his original team as any man who was
ever subjected to reserve clauses. And it reminds me of the story
about — down the river between Texas and Oklahoma where some
man one day took one rifle shot and killed a Chinese riding a mule and
the mule both. So when they brought him up for trial before the court
the court said there is some question about whether this island is under
the jurisdiction of Texas or Oklahoma. So we give everybody who is
going to be tried the option of being tried under Oklahoma law or
Texas law.
Well, this man said, "Well, I prefer to be tried under Oklahoma
law." So the court said, "All right, we will acquit you on the charge
of killing the Chinese and sentence you to be hanged for killing the
mule." The man said, "I don't like Oklahoma law. I prefer Texas
law. Give me a choice of Texas law." So the court said, "Under Texas
law we will acquit you on the charge of killing the mule and hang
you for killing the Chinese."
So it doesn't make any difference whether you have got a reserve
clause which you condemn or the substitute for the reserve clause
which this offer contemplates. They are going to wind up with the
same ultimate fate. They are going to be tied to a club just like a
serf in Russia used to be tied to the land.
Mr. KucpiEL. Sir, may I be heard briefly to rebut that?
Senator Ervin. Yes, sir.
Mr. KucHEL. Mr. Chairman, first of all, I most respectfully and
vigorously disagree. What the league was seeking to do in arriving
at this portion of the offer was to grapple with the problem which
a club would have when its great star would leave that club and sign
a contract with another. Thus, Mr. Chairman, the leagiie was dealing
with the theory of balanced competition in sports again, which pre-
sents, and I repeat, quite different problems from the problems of
the marketplace. And so the league wondered how best can we recom-
mend some kind of an arbitral commission that would be in the
interest of fairness and would give some measure of compensation
to the club which loses its superstar and with it perhaps its chances
for victory and its chances to continue attracting its fans.
122
And so the leagvie decided that the best way to have that kind of
an independent arbitral group would be to have the league make
one appointment to it, the players association make one appointment
to it, that they together, were they able to agree, would appoint the
third. Were they unable to agree, the president of the American
Arbitration Association would make the third appointment and if in
any contest before it no two members of the commission were able to
agree, that the third or neutral member would then have the re-
sponsibility to render the decision.
And then, ^Ir. Chairman, to insulate the jurisdiction of the pro-
posed commission from any attempt to reward or to measure the
market value of the player who left, great care was given to those
guidelines and, Mr. Chairman, I strenuously urge you to consider this
portion of that offer, again subject to negotiation as a basis on which
the club, the league and the players could come into the best kind of
an agreement to promote fairness.
Senator Ervtn. Well, the fact remains that it is designed to ac-
complish exactly the same thing the reserve clause was designed to
accomplish.
Mr. KucHEL. I deny that, Mr. Chairman.
Senator Ervin. And it does accomplish it. As long as the original
team is willing to meet the price of the other team, and then it
penalizes the other team or subjects them to a very drastic penalty
if they outbid the home team. And I am not too much enamoured
of arbitration because arbitrators are really bound by no laws and
awards are not subject to the very restrictive reviews in the courts.
In other words, it denies them access to the courts to settle the contro-
versy except under most unusual conditions.
Well, anyway, I was asking you about the common draft and I
notice that section 3 of the proposed merger agreement, says :
The NBA and ABA through their merger committees promptly will submit
to the current successive sessions of Congress through the calendar year 1973
such legislation as is reasonable and appropriate to permit the NBA and the
ABA to combine their operations in an expanded, single league with a com-
mon draft.
So the main object of it is to have a common draft under which
a man is denied the freedom of contract. The player
Mr. KucHEL. Mr. Chairman, I regret to say to you that I disagree
with that interpretation. Surely a common draft is an understandable
and a reasonable and I would say to the committee an absolutely
urgent part of the merger agreement. That much there can be no
question about. . .- j-
Senator Ervtn. Well, there is no question about the operation of
tlie common draft. It would be just as if we held members of the
club and Senator Tunney would say he gets first choice, that he
would be the one to give you an offer as to a player, and Senator
Hruska and mvself , on the other two clubs, would be precluded from
interfering with that. We would have to wait until the second choice
came around. We would have to wait for the third.
Mr. KucHEL. That would be, however, grounded on the order m
which the sequence unfolded and by this agreement it would be the
poorest team that gets the first opportunity to improve its competitive
abilities.
123
Senator Ervin. The way I read this thing, they would get first
choice, but then somebody else would get the second choice and go
around the table. Just like we used to vote when I was on the
Supreme Court of North Carolina. I would get one first personal
choice one time but the next time I would get the second, and the
third and finally the seventh.
Senator Hruska. Which section of the antitrust law did that
violate '^
Senator Ervin. Without exception from the antitrust law each one
of those players could bargain with each one of those teams. He could
sell his skill to anyone willing to pay the highest price. Under this he
can only bargain with one. So it is restraint of trade, not only restraint
of trade but it gives these teams a monopoly on all the players in the
U.S. — so it violates both first and second sections of it.
Mr. KucHEL. Mr. Chairman, if you had in a league today what
you have just said, isn't the richest team going to pick up all the
blue chip players and those teams that have been suffering are going
to suffer more? Isn't that
Senator Ervin. Xo. For there are other factors that would determine
where a player went, but even if that were the case that is no reason
to make economic slaves out of all the players and that is what this
bill does. In other words —
Mr. KuciiEL. I deny that they are economic slaves.
Senator Erven. You can always find an awfully good excuse for
doing an unrighteous thing, you know. You can find righteous causes
for it, you know, and you are making the teams economic masters of
the players. That is what it does.
Just one thing, you know when I went to school, I started to say
some people may think it was in the dark ages but I think it was
in the enlightened age but that is one thing that was not enlightened.
They used to have to pay students almost to go out to the basketball
games. But my observation is that basketball has become the greatest
sport, most popular sport in this country and I see in my State how
people crowd the basketball games in preference to football or any-
thing else.
I don't accept the theory that if we don't grant an exemption from
the antitrust laws here that basketball is in any danger of being a
dying sport.
Mr. KucHEL. Mr. Chairman, I hope it is not. I do sincerely believe
that the testimony that you will hear this afternoon will indicate
that in the absence of a merger, many, many teams are in grave
economic danger.
Senator Ervin. Well, there is one thing that is puzzling in that
field, Senator, and, that is, from the press, it seems to me that while the
franchiser may be losing money all the time, the value of the fran-
chise seems to constantly improve. And I would like to have figures,
if anybody can supply them, giving a record of the sales of franchises
in, these two leagues, during the past 6 years and vrhat the price was.
I have two questions and since you 'are here in the capacity as
counsel you are not perhaps authorized to answer. But I would like
to have them answered by some of the owners of the leagues.
The first is, what would be the owners' reactions if the Senate at-
tached conditions to the merger agreement which prevented the com-
124
moil draft and prevented any mandatory compensation factors for
free agents switching teams ? And the second one, what would be the
reaction of tlie owners of these teams, to an amendment to the S. 2373
which stated specifically that the common draft that teams should not
be considered exempt from the antitrust laws because of any acts of
Congress?
I don't ask you to answer that because I think it is beyond your
authority.
^Ir. KucHEL. Thank you.
Senator Ervin. I would like your clients to answer sometime dur-
ing the course of the hearing.
Mr. KucHEL. Sir, when you have concluded this examination, two
players will testify and then two owners and then the two com-
missioners.
Senator Ervin. Thank j^ou. I am sorry I detained you so long.
Mr. KucHEL. Thank you, sir.
Senator Ervin. I have enjoyed my inquiry colloquy and I have
enjoyed the frankness of your answers. And just to keep the record
straight, I would like to say as a former colleague of yours in the
Senate, I have for you the highest admiration for the qualities of
your head and the most profound respect for you for the qualities
of your heart.
Mr. KucHEL. Well, I cannot tell you how grateful I am and I
consider it an honor to appear before you and your colleagues, Mr.
Chairman, and I rather cherish the friendship that we have and I
thank you.
Senator Ervix. Thank you.
Senator Tunney?
Senator Tunney. Thank you, Mr. Chairman.
I first of all want to thank you. Senator Kuchel, for your excellent
statement. It was obvious to the committee that a great deal of
thought went into it and I appreciate it.
I was making some notes during the break and I would like to
read to you what some of my thoughts are and ask for your comment.
I think that perhaps the key question underlying these hearings is
whether or not the nature of the business of professional sports is
such that: (1), It should be subject to the full application of the anti-
trust laws and. regulated only by the forces of the marketplace or;
(2), subject to public utility type regulation by the Government to
some limited extent and exempted from the antitrust laws to the
extent so regulated, or; (3) self-regidated, and in the present un-
comfortable "posture of not knowing when the antitrust laws do and
do not applj^
Now, with regard to the third, I suppose that my thinking is that
at the present time, after listening to you testify that attorneys for
the teams and for the leagues do not Imow when the antitrust laws
apply and do not apply, if I understand your testimony. Is that
correct ?
Mr. KuciiEL. It is true. Senator, that in a number of instances
there are no decisions of our highest court sitting in judgment on
questions, for example, of the common draft or indeed of any of
the other agreements which have been reached by the teams in the
NBA or the ABA or football. Indeed, I guess it is quite truthful
125
to say that the judicial finding that the professional sport of base-
ball is exempt from antitrust laws is the only example where there
has been some assurance, and even there, as I alluded to this morning,
another lawsuit has knocked at the door of the Supreme Court asking
for a writ.
Senator Tunney. One of the things that I was able to pick up, if
I understood the colloquy properly between you and the Chairman,
was that you were really not sure whether the antitrust laws applied
to the merger and you were not sure whether the antitrust laws
would apply to the draft if there were a draft, and you weren't sure
whether the antitrust law^s applied to the option contract.
Now, I am wondering, and this I think goes to the heart of the
legislation that is before us — ^if we pass this bill, in our mind would
the Congress be exempting the baseball teams and the leagues from
the
Mr. KucHEL. Baseball?
Senator Tunnet (continuing). Excuse me; basketball teams and
the leagues, from the operation of the antitrust laws insofar as the
draft is concerned, and insofar as the option contracts are concerned.
Mr. KucHEL. I can say without any equivocation of any kind or
character, Senator, that the only subject to be covered by the bill now
pending in this committee is the authority by the Congress to the
two professional basketball leagues to merge into one, and any other
problem. Senator, arising under any possible application of Federal
law in the antitrust field would be precisely the same in its efi'ect on
tlie com])ined league as it would have been prior to that time on the
two independent professional basketball leagTies. And I would say.
Senator, that if you and your committee saw fit to adopt this legisla-
tion, I would hope that exactly the same language which this same
committee adopted 6 years ago when it approved this same kind of a
limited bill in football would be reiterated so that it would be clear
what was intended, to wit: Approval of the act of merger and
nothing else.
Senator Tuknet. So that if the bill passes and if there were insti-
tuted a draft by the league, and if the draft was challenged by one
of the players, as a violation of the antitrust laws, then in your
opinion rlu' league would be m the same position after this legislation
passed as it is now?
Mr. KuGHEL. Yes, sir, and
Senator Tunney. The two leagues are now?
Mr. KucHEL (continuing). Yes, sir; and the merger would be
irrelevant to that kind of a contest.
My colleagues suggested that there would be a single common draft
under the merger which I surely don't want to
Senator Tunney. Right.
Mr, KucHEL (continuing). Fail to indicate, whereas there are two
drafts today.
Senator Tunney. And the same thing — I suppose your answer to
be the same as applied to the option contract ?
Mr. Kuchel. Yes, sir; I really think, Senator, you hit on some-
think that is terribly important because of tlie Chairman's earlier
7S-4G5^72 — pt. 1-
126
comments, and I would like — it will just take a second — to read what
your committee said in passing the football merger, once again :
It is the intent of the committee that tlie new league will commence opera-
tion with no greater antitrust immunity than the existing individual leagues
now enjoy.
And that is precisely the basis upon which we urge this merger
might receive your approval.
Senator Tunney. Has there ever been a challenge, to your knowl-
edge, of the draft in the football league? There has not been?
Mr. KucHEL. The answer is no.
Senator Tunney. So there is no case law on that.
Quite appropriately, I think. Senator Kuchel, in your testimony
you alhided to the fact that they want to protect the public, want to
protect basketball, and I couldn't agree more. As I understood your
testimony you feel that the fan is not going to be protected if this
legislation is not passed because there will be a loss of teams and a
loss of competition, not only the loss of teams but also loss of com-
petition because the rich teams would be able to buy up the best
players and therefore there will not be the same competition as if
you had teams equally balanced?
Mr. KucKEL. I am persuaded that that is precisely the truth.
Senator Tunney. Well, I agree that this should be the purpose of
this legislation and I think that the incidental effect would be to
help the players, too. I think the players should be helped. But I am
concerned about certain points regarding the agreement of the two
leagues to come together.
I would like to just point out some of the provisions and I would
like to get your comments on the economic inequities that may or may
not enter ii the merger agreement is approved, and that one is that
the home team will continue to keep all the gate receipts.
Now, as I understood it, the franchise of the New York Knicks
could be worth $15 to $20 million and I imagine Madison Square
Garden has a capacity of somewhere around 15,500, 16,000 and some
of the smaller teams — rather, some of the teams that are playing in
smaller towns are operating in stadiums that house maybe 6.500
people. So clearly when you take the disparity between the Knicks
on the one hand, and some of the teams that are playing in smaller
communities on the other, with the merger the economic inequities
will still exist insofar as the gate receipts. And I understand that
the ABA gets no share of the NBA's TV pool revenue until the
1973-74 season and that the ABA team pays $1,250,000 each for the
privilege of merging, yet they are the ones that have the biggest
losses and the ones that apparently are on the bridge, some of the
teams, on the bridge of bankruptcy and that the merger agreement
also says for 5 years after the law is passed that the ABA teams
can't even vote when the league decides how the gate receipts are
to be split.
I recognize that the two leagues were dealing with each other at
arm's length and that the owner's of the leagues are dealing with
each other at arm's length. But it seems to me that where you have
teams coming to the Congress of the United Staltes and asking for
an exemption of the antitrust laws because there is a fear that bank-
127
ruptcy will result and there will be a loss of teams and there will
be a loss of competition, that the ABA teams have had to pay a
rather substantial price for the merger.
Mr. KucHEL. Senator, I am going to suggest that since we do have
two owners waiting to testify, one representing each league, each
himself a chairman of the merger committee of that league, I would
prefer to have them answer that question for you.
As you have said, it obviously was an arm's length transaction
and I rather imagine that they have come into an agreement repre-
senting quite a negotiation. But rather than to try to answer that
question, I would like to have the two witnesses who will follow me
answer it, if you do not mind.
Senator Tuxney. Fine, yes ; certainly, Senator. Thank you. I think
it would be probably apiDropriate for them to talk to that point
because we are talking about* the public interest and we are talking
about maintaining teams and if teams are financially weak, it seems
to me that it is going to be very difficult for them to pony up
$1,250,000.
Mr. KucHEL. That is on an installment basis, you will notice.
Senator.
Senator Tunney. Eight; I recognize that. But the other point, of
course, was that each team keeps all gate receipts and as I under-
stand it, that is quite different from football and from baseball
where there is a sharing. I understand in baseball it is 80-20 and in
football it is 60^0, and I point this out as a person who has intro-
duced the legislation and as a person who wants very much to see
basketball maintained in as many communities in our country that it
presently is in. And I would like to have some comment on that.
Then one last series of questions, because it is running awfully
late and I know that Senator Hruska has some questions and we
want to get to the other witnesses; but I would like to follow this
line of inquiry.
As I understood the acting chairman of the subcommittee, he said
that he felt that in as much as there was going to be an exemption
from the antitrust laws, that perhaps we ought to treat the teams
and the leagues like a public utility is treated. If there are exemp-
tions, there ought to be regulation.
Now, the question that I had is who protects the public now in the
case of franchise shifts or raids on college teams, TV blackouts and
ticket prices? Does anyone?
Mr. Ktjchel. Senator, let's just take a part of the completely rele-
vant question you have just asked. What about college players? Who
protects them?
Senator, there have been decision in this country indicating that if
there were any agreement not to take a young college athlete, the
antitrust laws would be violated.
It is to the credit, I think, of professional sports that they have
sought to arrive at constructive rules in that field and it is to the
credit of your committee that you will listen to people on that sub-
ject from colleges and universities.
I recall the so-called all sports legislation which was authored by
distinguished members of this committee, which was approved in the
U.S. Senate, and which appeared to be completely in the interests of
128
the American people, but it --::^^^:^^:lZ\X^^t)^'^^'-
interest is reflected. ^ ^t^^^ business of
spo^?s, ^^tZ t %?^^t%ic .tilit, legislation, or
^ri^:^S^^S2^^ sa^ senator^ that some
?ou couM ?^^^^^^ issue of whether or not they were complying with
the law in almost every instance. ,. ,
The auestion of a public utility regulation— I recall very little
Feder il -S hi the field of utility regulation and I am not so
fui^ Sat my ctats would advise you to consider that kind of regu-
^''l^'tried to approach that problem, Senator recognizing that there
will be niany points of vie4 in this hearing, by simply urgmg that
bi.etban il\n deep trouble today, that - ^-^4- ^/-^^^^^^
therefore is pending, that it can be answered by a simple act tor
"'l^\h~ Sr fhifcommittee might very well interest itself m
otltr facpirof the American professional sports problem because
there are-it is difficult to understand why ui ^f^^^^
sional SDort appears to be whoUv immune from any kind o± applica
tSnofX federal antitrust laws whereas another sport ours, for
exam^^le apparently is not. That simply represents a problem which
dS commhtS may ponder over, but I thought that we were serving
pmfLToTal basketball best by bringing to you this simple bill and
brinorino; to you that alone. t,-n +i ^^ t
Senator Tunxey. Of course, it seems to me that the bill that I
have introduced, and Senator Hruska was the mam sponsor of, has
opined up the subject of sports and the antitrust laws m a way that
?he lubiect has never been opened up before, and just yesterday I
read in the newspapers where President Nixon said with regard to
the Senators that it would be tragic, if the Senators were moved out
of Washington and we were left without a team And I think that
the PresidSit was speaking for the people of Washmgton when he
made that statement, how tragic this would be.
Mr. KucHEL. I do, too. _i „„
Senator Tunney. I certainly know he was speaking for me when
he said it, and yet there is no regulation on franchises at the mo-
ment at least insofar as I know, other than how the leag'ues disci-
pline themselves, and the question is if we are looking at the public
int'erest and if we are looking at protecting that public interest and
if we are looking at an exemption to the antitrust laws, shouldnt we
also at least look at the possibility of some kind of regulation m the
public interest of the movement of franchises or TV blackouts or
ticket prices or things of that kind.
Now, I haven't made up my mmd, I will tell you quite frankly.
But I am curious to know what your opinion is on that and i am
129
going to ask the same question of other -witnesses as they come be-
fore us. • 1 <? • 1
Mr. KucHEL. I could not urge this committee m good faith to
turn its back on any inquiry it believed it should make into profes-
sional sports in America. But at the same time as an attorney who
has the honor for the moment to speak for one segment, professional
basketball, I would urge this committee to consider the merits of the
basketball merger and the vehicle before it quite separate from a
legislative vehicle which might serve a far broader purpose.
That is why I mentioned and recalled the all-sports bill, and my
colleague has "suggested that that kind of legislation has been before
the Congress, a House or Senate, for almost 20 years. But never have
the two Houses been able to find a coromon meeting place.
And so without any desire to put a selfish foot forward, I would
wish to urge this committee not to sidetrack an urgent problem of
simple merger but to go forward with it and then simultaneously, if
it saw fit, to go into any larger questions.
Senator Tuxxey. One of the things that concerns me, let's say
that we pass this legislation and let's say that next_ year there is a
challenge to the draft, assuming that a draft is instituted, and it is
demonstrated as a result of the court action that in fact the Con-
gress was not exempting these from the antitrust laws with respect
to the draft and that therefore the draft is illegal, what happens
then?
When I introduced the legislation, quite frankly, I thought that
the draft was one of the main ways that we were going to balance
competition between the various teams in the leagues; and I am just
wondering where we are if we pass this legislation and it turns out
that the draft is in fact not held to be included as an exemption to
the antitrust laws?
Mr. KucHEL. I do not have any doubt at all that many of the
teams which comprise the two basketball leagues urgently wanted
this Congress to insulate them in a common draft imder a merger
bill. But it was because of the extreme difficulties that sports legisla-
tion apparently always encounters and because of what was the
unanimous feeling that some teams are shaking economically, that
we hewed to a very narrow path. Indeed, there might well be a situ-
ation where this Congress saw fit to adopt this bill and then litiga-
tion might ensue on the common draft.
I tried to be extremely careful this morning in what I said with
respect to our choice of a forum for we are of the opinion that
under the antitrust laws a common draft is defensible, but I did in-
dicate the risks involved and the length of time that would be con-
sumed.
Senator Tuxney. Well, I want to thank you very much for your
very forthright and in my mind intelligent testimony. I think that
we are wrestling with the problem that goes beyond just the bill
protecting the merger because I really do think that we are talking
about a lot of ancillary problems in which the public interest is di-
rectly involved. I am thinking now of franchiseships and TV black-
outs and escalation of ticket prices, to the point that many people
who are moderate and low-income can't go to basketball games. That
is all right, that is all right in a free enterprise atmosphere, but
130
mavbe it is not all right if you are asking the Congress to sanction
an exception to the antitrust laws. I am going to look forward with
fnte'^st^to the remaining testimony that we hear today omoiTOW
and on Thursday, and tl^n again in November because I hope that
some of these problems that I have can be straightened out.
Thank you very much, Senator Kuchel.
]\Ir. KiJCHEL. Thank you. Sir.
Senator Ervin. Senator Hart? .^4=^11 f^
Senator Hart. Thank you, I\Ir. Chairman. I came first^of all, to
hear our former colleague-I regret that I wasn't able to be here all
the time-and, secondly, to thank you, Mr. Chairman, for taking on
the chore of chairins this series of hearings I know that you will
produce a thorough ^and complete record and we will all be better
""Having said that, I acknowledge that we are all the reflection of
our own^ individual personal experiences through life. One ot the
verv first hearings I ever sat in when I got here m 1959 was a dis-
cussion of the problem of professional team sports. The Congress in
1965 reached the judgment as to what the ideal situation would be
as reflected in the all-team sports bill that Senator Kuchel made ref-
erence to. I supported the football merger bill m the belief that it
did indeed serve the public. I approach the basketball bill from the
same point of view. n- j. £ ■ ^
I should, before somebody sets forth a charge of conflict ot inter-
ests aclmowledge that part of that experience that I described _at-
fectino- my judgment is the fact that for some years before coming
to the^Senate I was— by reason of my wife— an officer and director
of ]30th a baseball and a football company and I am sure that affects
my judo-ment. But I honestlv believe that unless you can restrain the
most wealthy, the day comes when Mr. Yawkey has every third
baseman and every second baseman and whoever the equivalent is m
basketball, has every center. That is great for the personal satisfac-
tion of Mr. Yawkey but it doesn't do much good for the college guy
coming out because 'the gate is there and everybody attends it.
I think if this contributes to the stabilizing at competitive levels,
this is good medicine for everybody.
Mi\ Kuchel. Thank you, sir.
Senator Hart. Thank you very much.
Senator Ervix. Senator Hruska?
Senator Hruska. Thank you, Mr. Chairman.
Senator Kuchel, we have considered the scope of the exemption
which would be accorded by this bill if it is enacted into law. This
legislation has a lot of historj^. We have been considering it m the
Congress for 20 years. Ever since I have been here I remember it,
and^ have been on this committee during the years and so have my
colleagues. Senator Hart and Senator Ervin and myself, when at
least three times we had hearings on this.
I recall with some pleasure the appearance of Casey Stengle be-
fore this committee when he undertook to describe the intricacies
and complexities of antitrust law as viewed by Casey Stengle and
that was a performance to remember — not very profitable from the
legalistic standpoint but nevertheless delightful.
131
But I reQfill that there in the 86th Congrress we had this all-sports
bill and it embraced football, baseball, basketball and hockey. And it
undertook to exempt in five recited instances the clubs that engaged
in professional team sports in those respective fields. And one of
them was the equalization of competitive playing strength. Another
was the employment, selection or eligibility of players or the regis-
tration, selecting and assignment of player contracts.
No. 3, the right to operate within specified geographic areas.
No. 4, the regulation of rights to broadcast and telecast reports
and pictures of sports contests.
And, finally, the preservation of public confidence in the honesty
of sports contests.
I read from the text of S. 886, and that is found in the Senate
hearings which were held 12 years ago in July of 1959. Congress did
not pass four of those. It did pass one of them that had to do with
the regulation of rights to broadcast and telecast reports and pic-
tures of sports contests. That was converted into law so that any-
thing they did by way of agreement there was outside of the scope
of antitrust laws.
Then in 1965 we reconsidered the all-sports bill and the Senate
approved it but the House did not act. However, in the following
year, there were extensive hearings in this committee. There were
some hearings in 1966 in the other House. In 1966 there was passed
that portion of the bill which did for football precisely what this
Ijill S. 2373, seeks to do for basketball now.
]Mr. Kttcttel. Right.
Senator Hruska. I read again from the report, from the text of
the report on the bill which we did pass into law in 1966 : You cov-
ered it in your statement but I want to repeat it because I think it is
pivotal at this point and it will be pivotal throughout the considera-
tion of this Act. What is the intent of the committee ? What does the
law pretend to do? What does it undertake to do? And here is what
the report said:
It is the intent of the committee that the new league will commence opera-
tions with no greater antitrust immunity than the existing individual leagues
now enjoy. The sole effect of this legislation is to permit the combination of
the two leagues to go forward without fear of antitrust challenge based upon
a joint agreement between the member clubs of two leagues to combine into a
single league and to conduct their affairs as members of a single league.
Now, then, as nearly as I can determine, none of the other aspects
that were considered in the all-sports bill are involved in the bill be-
fore us now. They were rejected by the Congress then and they are
not sought to be reinstated by the'bill S. 2373. All that S. 2373 un-
dertakes to do is to put basketball on a parity with football pur-
suant to the act that was passed 5 years ago.
Now, there may be some inadequacies in the drafts as they now
exist, both in football and in basketball and in baseball, but I ask
you this question : Whether or not this merger bill, S. 2373, which
seeks to operate on basketball, whether it is passed or not, the inade-
quacies and the problems of the draft will still exist even as they
exist today, in the system of choosing players and recruiting play-
ers; is that correct?
ISIr. KucHEL. Senator, that is completely correct.
132
Senator Hrfska. Now, the new element is tliis, that the draft sys-
tem in basketball is used by the NBA, by the ABA ; they will draw
down by merger into one "^system but they will still use the draft
with all of its inadequacies, all of its sanction ?
Mr. KucHEL, That is correct.
Senator Hruska. All of its limitations. Also with all of its bene-
fits?
Mr. KucHEL. Yes, sir.
Senator Hritska. Now, there is an alternative to the common
draft. If the players want to reject the common draft they could
after merger or before with the exception that they could not make
a common agreement with both leagues because if they did then it
would be against the present antitrust laws.
Now, there is an alternative if they didn't want the draft. They
could take things with all the detriment that goes with it, the finan-
cial instability ,"the rich clubs getting richer, the good clubs getting
better, the poor clubs getting poorer and finally going broke and not
furnishing that competition which allows the treasuries and sinews
of war to" fill up to a point where they can pay players and assure
players of being paid; they can choose that route if they want to,
can't they?
Mr. KucHEL. Yes, sir.
Senator Hruska. But this gives an opportunity to them to choose
the route of continuing the common draft if they wish it by negotia-
tion with the clubs?
]Mr. KucHEL. The Senator is completely correct and makes the
case for the merger.
Senator Hruska. Now, it seems to me that we ought to consider in
this connection the further subject of how the baseball players are
doing. Baseball is known as the sport that has its own players. Each
team owns its own players and they are restricted far more than
professional football under the merger bill of 1966, or even to a
greater degree than professional basketball if this bill is passed into
law. However, baseball players are doing pretty good. Here is Frank
Howard with Washington. All of these are in the $150,000 annual
range and that is pretty good money. Even in the days of the Presi-
dential economic message of August 15, it is still pretty good money.
Here is Mr. IMays of San Francisco, Frank Robinson, and Carl
Yastrzemski of Boston. They are all up there and there are others
up there. I am not familiar with them all but they are up there and
they have gotten there under the common draft and in the sport
that has the most stringent control of their players of an}' of the
sports existing. Is that not true?
Mr. KucHEL. That certainly is.
Senator Hruska. Is there any element in the result of this bill,
S. 2373, that would militate against the players in basketball leagues
from attaining that same degree of advancement and increased sala-
ries and happiness that money can bring if it really does bring hap-
piness ?
Mr. KucHEL. No, sir.
Senator Hruska. Now, here are the Washington Senators; they
are losing money ; they are losing a lot of money. And yet they must
compete to pay Pete Broberg $150,000. He has gone back to school
133
now, I understand, but he has been playmg over the summer. He
moonlighted over the summer months. He will come back out and
play some more baseball at $150,000 a year unless they go so com-
pletely broke. Thev don't have the money. They are gomg to have to
pay Broberg $150,000 a year whether they move to Dallas or any
other place or whether thev stay here and that was achieved under
the baseball draft and the 'baseball system which is far more strin-
gent than what we have here.
]\Ir. KucHEL. It surelv is.
Senator Hruska. So' I don't see— there may be individual players
who mav have their differences about the benefits and the harmful-
ness of the draft, but they cannot shed the harmfulness of it and
collect onlv the benefits because in that event they wouldn't have tlie
system. It' is either they have got to take a system with all of its
benefits and all of its harms, whether it is the draft system or
whether it is some other system other than the draft.
Now, it is suggested that here the clubs bring this trouble upon
themselves. They cannot restrain themselves. They pay inordinate
salaries and they pay more than they can afford. They are going to
go broke and so'me of them have lost money consistently for several
years. And tlu^refore the Congress is turned to and is called upon to
restrain them. Instead of having them restrain themselves they are
called upon to be restrained.
My recollection is that every time we have a situation like this,
seeking an exemption from the antitrust laws, that same situation
applies. It certainly was true in football; it was true in the televis-
ing of \)vo sports ; it is true in the Civil Aeronautics Act, for exam-
ple, and to the areas in which airline companies can go and the rates
they can charge. In those instances there was a lack of restraint.
There certainly was a lack of restraint in the case of rates for
motor carriers and it got to be so bad the motor carriers couldn't
survive and Uncle Sam had to step in ; Congress had to step in and
say enough of this: The nation needs the transportation given by
motor carriers. We are going to exempt certain activities of the
motor carriers having to do with the ascertainment of rates. We are
going to exempt that from antitrust restrictions and limitations.
Do you see any difference in this situation involving the lack of
self-restraint ancl imposing the will of Congress upon it than in the
case of many of the other exemptions from the antitrust law which
the Congress enacted?
Mr. KucHEL. No : Senator, I see none at all.
Mr. Hruska. Well, thank you for coming. That is all the ques-
tions I have at the moment.
I know, Mr. Chairman, that Senator Kuchel was on the sick list
not too long ago. He looks well and his performance wouldn't indi-
cate that he has been ill at all. But he has borne up well mider to-
day's strenuous activities and I congratulate him.
Mr. Kuchel. Thank you very much.
Senator ER\T:isr. I will say the distinction between the Interstate
Commerce Act and this proposal is just about 1,000 times wider
than the Pacific Ocean. A"\nien the railroads needed restraint, they es-
tablished the Interstate Commerce Commission to regulate the ones
that needed restraints, the railroads. But here the ones that need the
134
restraints against this uneconomical bidding for pla^^ers are the club
owners. There is no proposal here to put any restraints on the club
owners. The proposal is to put the restraints on the players and the
people who have athletic skills. It would be like the regulation of
the railroads if they regulated the people, the shippers, instead of
the railroads. They have got the wrong silo as we say in North Caro-
lina. Here we are grabbing the players and the would-be players in
order to let the management restrain them because the management
needs restraint. I see no similarity.
Now, I want to give you an opportunity to correct two things.
You said there is nothing but a common merger under this bill. Now, at
the present time under the first sentence of the statute that is sought
to be amended, you can have two different groups contracting with
television, selling television broadcasting rights, can't you? — the
ABA and the NBA — each one of them can make a separate contract
under that, can't they?
In other words, there can be two different contracts made? If they
want to take advantage of that Act, ABA can make one contract for
its games and NBA can make one contract for its games ?
Mr. KucHEL. Senator, I think that this is drawn so that as of
today it would affect the two professional baseball leagues and at
the same time affect the one professional football league.
Senator Ervin. We have got two organizations now. You have got
two organizations, each of which under the first sentence can make
its contract for televising its games.
Mr. Kttcitel. Senator, we don't touch the first sentence of the stat-
ute.
Senator Er\^n. I know you don't directly but indirectly you do
because instead of having two separate professional organizations
that can make television contracts, you are going to combine the two
leagues and then they can form just one organization to make the
television contract, so you are going to cut down the chances of the
people that like to see basketball games on television to 50 percent of
what tliey are now.
Mr. KuciiEL. I am not so sure that that is correct, Senator. Foot-
ball, being merged, has entered into that type of television contract
and that is what the combined
Senator ER^^N. Listen very carefully to the language. It provides
that the antitrust laws as defined in section 12 of this title or in the
Federal Trade Commission Act as amended "shall not apply to any
joint agreement by or among persons engaging in or conducting or-
ganized professional team sports, football, baseball, basketball or
hockey, by which any league" — by which any league — "participating
in professional football, baseball,' basketball or hockey can test skills
or otherwise transfers all or any part of the rights of such member
club m the sponsored telecasting of the games of football, basketball,
baseball or hockey as the case may be engaged in or conductinc: such
clubs."
In other words, a separate league maizes the contract. So. under
section 1, without this amendment, you have two basketball leagues
each of which is authorized to make a separate contract for televis-
ing the games. But by taking and combining these two separate
leagues into one league by a merger— you have only one organization
135
left to make televising contracts instead of two. So yon reduce the
ability of the television companies to negotiate separately with two
contracts, two clubs, and compel it to negotiate with one and you have
the power to deny the viewer of two choices of these major league
games and take one. ^i ^ •. •
^Ir. KuciiEL. Ur. Chairman, I disagree. Let me first say that it is
my understanding, and I therefore state to this committee that the
National Footbalf League has entered into three contracts, one with
each of the major networks. At any rate, you and I do have a choice
at least one day a week of watching one of two football contests.
But again my point is this : If you find that the economic urgency
is such as to permit you to vote for the merger, there will be more
teams opei-athig in the expanded league than we believe would be
operating if you were to continue the present two leagues.
Senator Ervin. But you take the power of two leagues to make these
television contracts and you reduce the power of one league to do it.
I am not so concerned about how the power is exercised but what I fear
is power and I don't believe in taking 50 percent power and adding
another 50 percent and giving 100 percent, putting it all in one group.
That is what you do. So you do that.
In the second place, you say it is nothing but a simple merger.
You have two leagues, don't you? And a player can accept a bit
from either one of them if he receives it; can't he?
ISIr. Ktjciiel. Yes, sir.
Senator Ervix. And so he at least gets the chance if he is good enough
to receive two oilers from two different teams in two different leagues?
jNIr. KuGHEL. Well, surely, Mr. Chairman, that is why the leagues
have come here today to ask you for an opportunity to merge.
Senator Ervin. Your proposal makes a drastic change. It takes half
of a man's chances to negotiate a contract away according to his own
pleasure, away from him, doesn't it ?
Mr. KucHEL. I would say rather that it enhances at least chances
to remain a professional athlete during his playing lifetime.
Senator Ervin. Well, I am asking about the law of the situation.
In other words,, if this passes, let's look at what happens to a player
with a skill. Under the present situation, he could negotiate a contract
with an ABA team or an NBA team. If the bill passes, there will be
only one organization he can negotiate a contract with, so his freedom
to contract is reduced half in two from what it would be ?
jMr. KucHEL. That is on the assumption. Senator, that the teams
continue in existence and are economically viable, something which
is not the fact, and therefore an assumption that I think is truly a
little dangerous to make.
Senator Ervin. I just don't agree with you on that. I don't think
the owners of these teams are going bankrupt. A lot of them when they
can get a big enough price for it just sell and they take a big capital
gain.
Well, the Supreme Court says that what was attempted in the
past will be attempted in the future unless it is restrained. I don't
like to disagree with my good friend from Nebraska but this 1965
all-sports bill was designed to legalize for each sport a common
draft and I am surprised to find that what I said against that bill
in 1965, on the 13th day of August, 1965, applied exactly to the com-
136
mon draft which subsection 3 of the basketball merger agreement says
"?s\id^St:Ys"Sthe fact that one of the great freedoms
of Americans was freedom of contract :
The Dendin- bill would not affect others' freedom of contracts— lawyers who
.tniLve the right to make free contracts and to sell their legal services for what
they were worth-the^ame thing would apply to doctors, businessmen and wage
earneTf BvTt the bill proposes to rob every nmn }^^ ff^'^^^ j"^^"^"^ ^
in hflsPhall football basketball or hockey of the right to sell his skill to the high
St SlSn the free market and negotiate a contract with anybody who desires
ffnurchasrhis athletic skill. The pending bill would authorize the professional
baseSffooFbln basketball and hockey clubs to enter into an agreement under
w^ch'persons po'sSing skill of athletic nature in ^ilf ^eld ^ -lnc\t^^^^^^
oTi<T€,<ro^ fnr the nnrnose of making money could be allocated among tnemseiyeb
bvf f ag4em^!t made by thSn in he absence of the persons to be affected by the
akreement and without their knowledge and consent
Onlv one team could negotiate a contract with a particular person. A college
bov possessing skill at baseball would have his right to negotia e a free con-
tract on a Sfe market and sell his skill to the highest bidder denied him by
an ac-reement made bv the persons engaged in baseball for a profit Under this
aSrelmenTonly one team could be permitted to negotiate with the boy. He
would have to sign a contract with that team or be denied the right to engage
in baseball as a profession for a livehhood.
That hits the nail in this bill squarely on the head and I thmk
that vou are incorrect in saying that people agreed to this. You say
vou are going to negotiate with the players but you are not gomg to
neo-otiat? with the people who are going to be drafted. They are not
patties to it. They are drafted without their knowledge or their con-
sent. Thev have 'nothing to do with making this agreement, i his
ao-reement is to be negotiated between the present players and the
inanao-ers. And vou don't have to even negotiate. If you get tins
passed you can just say here it is; take it or leave it. \ou don t have
to negotiate with them at all. .1 ^ v • +
So" it is just the same effort. People can always see that it is to
their advantage to put other people under subjection, and the person
who wants to put other people under subjection can always tmd
some way to reason within himself that he is engaged m a righteous
^^^You know, we southerners one time had slavery in the South and
we rationalized that it was good for the slaves. It is the same old ar-
gument that is being made here today, in a much more rehned way
than such southerners as John C. Calhoun did.
Thank you.
Mr. KucHEL. Thank you, sir. . -, n -r u vi +
Senator Hruska. If the Senator would yield, I would like to
make a comment or two about the way the radio and television came
m.
The reason for that was simple: The very successM clubs
in large cities got very large amounts; Houston got $2,750,000 m
196.3. because they were able to contract for their television rights
very successfully." They were a successful team and they were able
to do that.
I don't know what the range is. -r * i j.
Philadelphia got $11/3 million; and then we had Los Angeles get-
tings $1 million; Detroit, $11/3 million; New York, $1,200,000.
137
They were the lucky ones. They were not under subjection; but
there were some who were under subjection. There was Kansas City,
for example, that got $300,000 and Washington got $300,000. Others
got $700,000, $600,000 plus, $500,000.
Now, by passing the 1961 Act these clubs were enabled and im-
powered and authorized to get into a master contract or two or three
master contracts with the TV authorities, put the money into a pot
and they divided it equally team for team.
Mr. KuciiEL. The Senator is correct.
Senator Hruska. Which on the basis of $15 million came to about
$750,000 for each of the 20 teams that were in the two leagues at the
time. That pot is much bigger now because the contracts are more
lucrative a^d at the same time the number of teams is greater. But
there we found certain teams were penalized and they were sub-
jected, they were held under subjection; they wouldn't get their
$1% million. All they got was $750,000 and why did they do it? They
did it because in the interest of the overall continuing functioning
and prosperity of the league and thus insuring the type and quality
of footl^all that they were able to do it. And so when we talk about
subjection, we have" to take those things into consideration. And I
don't know, there are a lot of people that would like to be subjected
to $150,000 a year to play baseball and the present system permits
some of them to do it. Of course, there is some price to pay as we go
along and there is freedom of contract and yet it is inhibited again
and again. It is certainly true of the labor union contract. I come
baclv to that because a man in Pittsburgh working for a steel mill, if
he doesn't like the contract made for him, he can go elsewhere and
get his employment. That is perfectly all right. But he has to be ac-
cepted by the union at the new plant he goes to in Los Angeles,
Calif., or wherever. He loses his seniority ; he loses his life insurance
and whatever he accumulates under it and he loses the fringe bene-
fits. Yet he is inider subjection and it is a system that is pretty well
ingrained in the American economy and society and the same thing
is true here. The same thing is true here.
And I wouldn't say that there aren't some inequities. Of course,
there will be, but there are benefits that far transcend those disad-
vantages which do come along and result from it.
Senator Ervin. I am under the impression that the majority of them
get even far less than U.S. Senators get.
Mr. KuciiEL. Somewhere I believe the figure $45,000 is used for
basketball men but again I think Mr. Xathan will be able to testify
on that.
Senator Enviisr. Well, of course, we take most of it away from
them.
About this division of TV profits, this horrible inequity which my
good friend from Nebraska so accurately pictured is going to be con-
tinued under this agreement. The merger agreement prohibition of the
right of ABA to share in any NBA proceeds from network television is
going to exist for several years, up to 1973, isn't it?
Senator Hruska. Two more years.
jSIr. KucHEL. Mr. Chairman"J you refer to page 7 of the merger
agreement which is — rather than interpret it I will just read it :
No ABA Team will be entitled to any share of any NBA proceeds from net-
work television received with respect to any game played during the 1971-72
138
nr 1072 7^ season nor in any event, with respect to any game played before
or 19<2-'3 season nor in a > , proceeds from networlv television re-
o^fv^l'^wfth rls^cl to aU^ to the enactment of exemption
^e^I.Htionbv Congress will be shared equally among all members of the ex-
nanded single leT^einovUled, that such sharing shall in no event occur prior
panded smgie iea„ue , ^ , ..PTSon The structure of the Plan, so far as
Ts ^.^S^'Z^l^^'eiBT^ IbA to enter into separate network
televisfon contracts mitil the expanded single league comes into being.
Senator Ervix. That is in a multitude of words exactly what I
said in one sentence, that under merger agreements the ABA seems
not to share in the NBA network prior to 19 ( 3. n « ^ fi .f
Senator Hruska. That is correct, and yet we freqiiently find that
in these contracts involving a transition from one basis to another
Lre is a grandfather clause woven into it and that is all this does
Joe Foss ifegotiated that contract for the ABA about 5 years ago. It
has oot 2 vears to run and it was felt apparently that it woukl be
onlv'tair that that be allowed to run and then the new entity would
take charge and negotiate a new contract for the both of them.
' :Mr KucHEL. The Senator is right.
Senator Ervin. That is alL Thank you very much.
Air. KuciiEL. Thank vou, Mv. Chairman. Senators.
We do have two basketball players, Senators, professional league
plavers, who wish to be heard now. i= ,i ^ -c^i^
The first one, if I may introduce him, is Larry Jones of the J^lo-
ridians who will speak for the American Basketball Players Asso-
ciation, accompanied by the attorney for that association, Mr. Arlan
lenator Er\t[N. We are glad to have you gentlemen from the
clubs. We thank you for your appearance.
STATEMENT OE LAREY JOI^-ES, PLAYER WITH THE ELORIDIANS
BASKETEALL TEAM, ACCOMPANIED BY AELAN PEEBLUD,
ATTOENEY FOE THE AMERICAN BASKETBALL ASSOCIATION
Senator Ervin. You may proceed.
Ur. Jones. Thank you, :Mr. Chairman.
Mr Chairman and gentlemen, my name is Larry Jones and 1
appear before you todav to express my support and the support of
the American "Basketball Association Players Association for the
mer^rer legislation. Accompanying me today is ISIr. Arlan Preblud of
EpsFein, Loews and Preblud law firm, representing the players asso-
ciation, American Basketball Association.
I am a native of Ohio and I received my undergraduate degree
from Toledo University in 1964. Recently I received my master's
deo-ree in guidance and counseling from Ohio State and I am work-
ing toward my doctorate in the same field.
When I graduated from Toledo, I played one season of profes-
sional basketball with the Philadelphia club in the NBA. I then
]ilayed two seasons with the Wilkes-Barre Barons in the Eastern
Basketball League, which is a semiprofessional basketball league.
I tried out unsuccessfully with the St. Louis club and the Balti-
more club after leaving Philadelphia. ^Vlien the ABA was formed,
even though I had then l^een offered a contract by the Los Angeles
Lakers, I joined the Denver club. I felt I had more opportunity
139
with a new club in the new league. I played with the Denver club
for 3 seasons. I am now playing for The Floridians of the ABA.
^"Nlien the ABA was very young I became concerned about the
well-being of its players and, 1 am pleased to say, with the coopera-
tion of niany people I was successful in causing the creation of the
ABA Players Association. I was the first president of that associa-
tion. .
Mr. Chairman, I feel mv experience with professional basketball
in the American Basketball Association and with the other ABA
players gives me a good perspective that may be helpful to you.
First, let me say that the ABA Players Association supports the
legislation being discussed today. We recognize that without this
legislation many professional basketball franchises may cease to
exist, thereby eliminating basketball employment for many of our
members. The merger will not benefit all ball players, such as enter-
ing rookies, but it^will benefit the vast majority of ball players.
^loreover, the benefits that the ABA Players Association has been
able to achieve in our young league are not comparable to those in
the NBA. We could not expect to achieve equal benefits for many
years, if ever, without this legislation and a subsequent merger. But,
Mr. Chairman, unless this legislation is successful, I am concerned
not only about increased benefits, I am concerned about the stability
of all player jobs.
The ABA Players Association was formed for the purpose of
helping to achieve, for all basketball players, better working condi-
tions and opportunities. We feel these conditions and opportunities
will be more enhanced with the passage of this legislation.
I feel compelled to point out that many ABA players are not
totally satisfied that the negotiations with the NBA Players Associa-
tion have been brought to their best or final conclusion. For instance,
the executive committee of the ABA Players Association does not
endorse the team compensation for the loss of a free agent. The
ABA has no such provision now and we hope collective bargaining
after the merger will result in further consideration being given to
the necessity for the provision.
Senator ER^^:x. You state in effect — excuse me, I thought you had
finished.
Mr. JoxES. Hov\^ever, having pointed that out, we are convinced
that nothing should be allowed to deter the speedy passage of this
legislation. We feel its success vital to our members' well-being.
Senator ER^^x. You say this legislation, the merger, rather, will
not benefit entering rookies? AMiy will the merger benefit those
already engaged in the sport in the ABA or the NBA and not bene-
fit entering rookies?
Mr. JoxEs. Well, for one thing, if there are not two leagues, then
there would be some guj'S out of jobs and, for instance, there are a
lot of ball players coming out of school today with the two leagues
are able to obtain large sums of money which I don't
Senator Ervix. In other words, they won't have to pay the enter-
ing rookies as much to get them to sign a contract ?
]Mr. Jones. Let's put it this way: They won't liave to pay
unproven ball players in professional basketball that sum.
140
Senator Er^in. So it will have a very disastrous effect on what
the entering rookies are to get?
Mr. Jones. I don't know about disastrous.
Senator ER^^N. Well, very substantial ?
Mr. JoxES. It would have some bearing.
Senator Ervin. In other words, the management won't have to
pay out as much money to recruit new players as it is paying out
now ?
]Mr. Jones. That statement is probably true.
Senator Ervten. So I understand. That, I think, is the objective.
]Mr. Jones. But you must realize, after this rookie has a season,
then that is another thing.
Senator Ervin. Don't you think basketball has become constantly
increasing in its popularity throughout the United States ?
]Mr. Jones. Yes; I agree to that.
Senator Ervin. And'still you entertain the fear that although it is
an increase sport, constantly increasing popularity, it may prove to
be a failure?
Mr. Jones. I think so— mainly speaking from some of the situa-
tions that have happened in the past.
Senator Ervin. Now, normally an American can make a contract
and sell his skill to anybody in the market for that skill for whatever
price he can obtain ; in other words, that is an inseparable part of the
free enterprise system. Do you think the free enterprise system won't
work in professional sports ?
]Mr. Jones. No; what I am saying is that if there are not two
leagues, then there will be X number of ballplayers looking for jobs.
That is what I am saying.
Senator Ervin. If you merge the two leagues, you have one, don't
you ?
Mr. Jones. Right.
Senator Ervin. So there will be
]Mr. Jones. Actually, 11 teams in ABA and 17 teams in NBA.
Senator Ervin. So it looks like the merger is going to put people
out of jobs instead of
Mr. Jones. Put into one league, 28-team league.
Senator Ervin. Now, how did the American Basketball Associa-
tion express their approval of this merger ?
]Mr. Jones. I have just stated that they are in favor of it but we
do have some restrictions.
Senator Ervin. Was it unanimous ?
Mr. Jones. From the consensus which I received from the plaj^ers.
Senator Ervin. Well, how was that consensus obtained?
Mr. Jones. It wasn't unanimous if that is what you are saying;
no.
Senator Ee\t:n. It was not ?
Mr. Jones. No.
Senator Ervin. There is very strong opposition in ABA against
any merger, isn't there, among the plaj^ers ?
]Mr. Jones. Yes; there are some people against it but ]\Ir. Chair-
man
Senator Ervin. Yes ?
141
Mr. Jones. But you must — like I understand it, no matter what
you talk about you are going to have some disagreements about
whatever you might be talking about.
Senator Ervin. This is right. Even the majority is not always
right as we have found out on many occasions.
Did you have any kind of vote and give each player in the ABA
an opportunity to vote?
Mr. Jones. We sent letters to each player representative, talked to
player representatives on the respective teams in our league and got
a consensus of what the responses
Senator Ervin. How did you get the consensus? You didn't have
a vote on it. You just got a consensus from those that replied?
Mr. Jones. Basically you are right.
Senator Ervin. What percentage of them favor it ?
Mr. Jones. Well, I can speak wholeheartedly for the team which
I particularly play with — the Floridians.
Senator Ervin. But there are 13 other teams?
]SIr. Jones. Eight; this is correct. But like — may I say something,
please, Mr. Chairman — speaking on behalf of the executive commit-
tee which represents the players, speaking on behalf of the players,
this is why we have the executive committee because they do repre-
sent players.
Senator Ervin. Then the executive committee makes the decision
rather than the players ?
]Mr. Jones. They don't make all the decisions.
Senator Ervin. I want to find out how you arrive at a consensus.
"Wlien I run for the Senate they arrive at a consensus by putting
votes in the ballot box. How did you get the consensus ?
Mr. Preblud. Mr. Chairman, may I indicate for the committee, at
a meeting in Houston, Tex., held in June 1971, where all the player
representatives were present, at that meeting they indicated their
support of the merger. Subsequent to that a teletype was sent out to
each plaj'er representative bringing him up to date on developments
since June and at that time a request was made for their vote, either
favorable or unfavorable toward the support of the merger with the
proviso if they did not elect to respond, that it was assumed that
they responded favorably.
We did receive a response, Mr. Chairman, from the majority of
the players and they were in support of the merger.
Senator Ervin. In other words, you counted everybody's views
who didn't express their views to arrive at the consensus ?
Mr. Preblud. We took two votes, Mr. Chairman. At the first vote
everyone-
Senator Ervin. How many were present at the meeting ?
Mr. Preblud. Eleven teams were represented.
Senator Ervin. Hov/ many people ?
]Mr. Preblud. Fifteen people were
Senator Ervin. How many players do j'ou have in the-
Mr. Preblud. There are 11 teams in the ABA, jNIr. Chairman, and
approximately 120 ballplayers. These player representatives.
Senator Ervin. How were they elected ?
Mr. Preblud. By their players, on the individual teams.
7S-4C5— 72— pt. 1 10
142
Senator Ervin. Did thev all— did thev take tliem a silent vote?
Was tliat one determined "in that case like they did ni the second
one? ^ ^ ,.
Mr. PREBLin). I am sorry ; I don't understand your question.
Senator Ervix. In other words, you count everybody voting
favorably who doesn't vote negatively?
Mr. Preblud. Of those present.
Senator Ervin. The reason I am puzzled, there is a witness pre-
]>ared to testify tomorrow— Zelmo Beaty— who plays for the l^tah
Stars and he says he is the president of the American Basketball
Association and he is opposed to the merger.
]Mr. Preblud. He certainly has the right to oppose the merger,
Mr. Chairman. • j_- o
Senator Ervin. "Wlio is the president of the organization {
Mr. Jones. Actually, at this time it was my understanding that
Zelmo Beatv had resio-ned as president.
Senator Ervin. Was anybody elected to take his place ?
Mr. Preblud. The vice president.
Senator Ervin. ^Yhere is the vice president?
Mr. Preblud. The vice president is not present. ^
Senator Ervin. Well, it is just your understanding. You haven t
seen his resignation, have you ?
Mr. Jones. No ; personally I haven't seen his resignation.
Senator Ervin. He is one member who is opposed to it, I under-
stand, and is going to come in and testify. p , • ,
Mr. Jones. lsh\ Chairman, why is it so much necessary tor him to
be here, the vice president, is what I am saying, as it exists? I am a
member of the executive committee.
Senator Ervin. It is not, but are you a member of the executive
committee ?
Mr. Jones. Yes ; I am. . • ^t • ,
Senator Ervin. Was the executive committee unanimous m this i
Mr. Jones. No ; the vote, when we voted, it was 3 to 1 in favor.
Senator Ervin. Three to one. Okay. Thank you.
Senator Hart. I am not sure that it is of overriding concern, Ixit
did I understand counsel to say that the teletype explained the nego-
tiation and the proposal and asked for their views but advised them
that if they did not respond, that it would be assumed they con-
curred in the proposal ?
Of those who did respond, what did a majority of those responses
sav ^
'Mr. Preblud. Senator, those that responded, first of all, indicated
by majoritv vote their support of the merger. ^ _
' Senator Hart. I thought that is what you said, so that a majority
of those who did express themselves, expressed themselves favora-
bly?
"jNIr. Preblud. That is correct.
Senator Hart. To the extent that you want to compute the
approval from the silent, based on the teletype, we can do that also?
Mr. Preblud. That is correct, and I would only further say that
by indicating that all player representatives were present at a meet-
ing in Houston where we 'discussed the pending merger at that time,
alfthe player representatives and the executive committee were pres-
143
ent and voted to support the merger. This teletype was merely an
update to bring them up to date as to the negotiations that were
then going on between the NBA and the NBA Players Association.
Senator Hart. Thank you.
Senator Hruska. And were these teletypes sent to the representa-
tives?
Mr. Prebltjd. The representatives of each ball club.
Senator Hruska. And, of course, the representatives work closely
and are in frequent communication with the players on their teams?
Mr. Prebltjd. They were instructed to discuss this with each of
the members of their team.
Senator Hruska. They did what?
Mr. Preblud. They 'were instructed to discuss this with each
member of their club.
Senator Hruska. How many team members are on each club ?
Mr. Jones. Well, with our club there were — like we had 16 ball
players in camp — they were explained what was going on but it was
dealing with the ball players that were considered members of the
ball club.
Senator Hruska. So that
Mr. Jones. Otherwise it
Senator Hruska (continuing). So that when you say you got a
consensus, it was through that means? The players would express
themselves to the representatives, the representatives to the executive
committee ?
]Mr. Preblud. That is correct.
Senator Hruska. Are you disappointed that it wasn't unanimous?
Mr, Preblud. No ; not particularly, because I think in this type of
situation, you are bound to have a free exchange of ideas and I
think it would be unhealthy if there wasn't a free exchange of ideas
and difference of opinion, just like in the Senate I am sure on every
measure there is some disagreement. The vote may be unanimous or
split but if there were not disagreement there would be no necessity
to hold hearings of this type or any other type.
Senator Hruska. Well, if on a disputed issue you find some for-
mula where you can get a unanimous opinion, let us know about it,
will you? We need that formula in Congress very badly.
[Laughter.]
Senator Ervin. Do you have a
]Mr. Preblx^d, Thank you.
Senator Ervin (continuing). Do you have a copy of the teletype
that you sent out, because I have found that responses largely
depend on how a question is phrased? For example, I heard of a
man one time ask another — he said, "Have you quit beating your
wife?" Somehow a very different answer. Can you supply for the
record a copy of the teletype ?
jMr. Jones, At this time we don't have a copy right now but we
will supply it.
Senator Ervin. Send it in.
ABA League, New York, F Players Assn.
Personal and confidential * * * not for release.
To all player representatives of the ABA Players Association: At Execntive
Committee of the ABA Players Association held September 16, 1971 in Wash-
144
ington. D.C., the Executive Committee voted to endorse the merger of the NBA
and ABA. Executive Committee was also advised that NBA has advised the
NBA Players Association of the following :
1. There is no reserve clause.
2. There will he no cut in compensation during the option year of a con-
tract.
In addition, the NBA made the following five point offer to the NBA players
which upon acceptance would affect the ABA players in the merged league :
1. Rookie contracts to be for one year and one year option unless club and
rookie agree on longer term which would not have an option year.
2. Option clause would remain in existing veterans contracts until their ex-
piration.
3. No option year in future veterans contracts.
4. Before a free-agent may sign with another club his former club has the
right to retain him by meeting the highest offer made to him by the other
club. . . , ■, ^j.
5. If another club signs a free-agent, compensation m either money, draft
choices or players may be paid to the former club as determined by a three
member panel composed of one representative chosen by the Players Associa-
tion, one representative chosen by the Commissioner and a third chosen by the
other two. Arbitration to be based on principles one of which is that compen-
sation shall not be substantial as to materially discourage free movement of
plavers from one club to another.
The ABA Players Association Executive Committee endorses the statement
that there is no" reserve clause and the dropping of any cut in salary during
the option year. .
Executive Committee also believes that the first four points of the five point
offer are reasonable and acceptable and in the best interest of the ABA Play-
ers Association.
We have reservations about point five (compensation) and emphasize that
all points are negotiable.
We believe that merger of the ABA and NBA is most beneficial to the vast
majority of ABA players and that point five should not prohibit our support of
merger. .
Executive Committee will have a representative testify to the above effect m
Washington at Senate hearings on merger bill Tuesday, September 21st.
Advise vour players and request your immediate concurrence. Contact Arlan
Preblud (30.3)266-2191 or (303)756-3072 no later than 12:00 noon Sunday,
September 19, 1971. Unless you respond by that time your concurrence is as-
sumed.
Executive Committee,
ABA Players Association.
Corrections: Point Four (4) line 2 should read— highest offer—; Point Five
(5) line 6 should read — based on —
ABA League, New Iork.
Personal and confidential — not for release.
To all player representatives of the ABA Players Association: Please disre-
gard corrections listed on previous telex. The correction should read :
Point Five (5) line 6— Based on principles— third paragraph after Point
Five should read: They have reservations about point five (compensation) and
emphasize that all points are negotiable.
Executive Committee,
ABA Platers Association.
Senator Ervix. Now. I understand you said the vote was 3 to 1 on
the board of directors.
Senator Hruska. Executive Committee.
Senator Ervust, Three to one ?
Mr. Jones. That is correct.
Senator Ervin. How many members do you have on the executive
committee ?
Mr. JoxES. Four at that time.
Seiiator Ervin. Four. And I understand there were only 15 repre-
sentatives at the meeting in Texas ?
145
]Mr. Preblud. ]\Ir. Chairman, there are 11 teams; each team has a
player representative along with the 4 executive officers, a total of 15
people.
Senator Ervin. How did they vote ?
Mr. Preblud. At what point ?
Sen. Ervin. You said they approved it. How did they
Mr. Preblttd. The executive committee voted
Senator Ervin. I am talking about the meeting in Texas.
Mr. Preblud. The majority voted in favor of the merger.
Senator Er\in. I know, but what majority? It seems we voted clo-
sure today by a majority of one. Sometimes the majority is small.
Mr. Preblud. I don't recall the vote.
Senator Ervix. You don't ?
iSIr. Preblud. No.
Senator Ervin. How many people did you send the teletype mes-
sage to ?
Mr. Preblud. All 11.
Senator Ervix. Eleven ?
]Mr. Preblud. And the four on the executive committee.
Senator Ervin. And how many of the 11 responded?
Mr. Preblud. Six.
Senator Ervin. Six. Well, six does not appear to be as broad a
consensus as I — if all six of them voted for it that responded.
Mr. Preblud, No.
Senator Ervin. How many of them voted against it ?
]Mr. Preblud, Numerically, Senator, the majority voted in favor
of it. It was not taken on a team vote but on a total player vote.
Senator Ervin. "Well, how many of the 15 representatives were told
that they Avould vote for it if they didn't respond. How many of them
responded? You say six out of the 15 responded, Hoav many of the
six voted for it?
Mr. Preblud. First of all, 11 had the time to respond, not 15.
Senator Ervin. Everybody in the United States who is registered
to vote has an opportunity to vote. A lot of them don't take advan-
tage of it.
llr. Preblud. You talking about 15; there are on\j 11 franchises.
Each franchise has one player representative.
Senator Ervin. And four officers?
Mr. Preblud. The four officers had already voted. Now, the 11
franchisers were given the opportunity to vote. Out of those 11, six
responded. Numerically, out of the six a majority had supported the
position to support the merger. The other five teams had not
responded.
Senator Ervix, Well, the majority might be four to two, five to
one. How many voted in favor of the merger of the six that
responded? It would seem awfully easy to remember that kind of a
vote, if it was just six.
Well, that is all right. You can supply it for the record.
Mr. Preblud. Forty-eight in favor, 15 opposed.
Senator Ervin. Forty-eight, and only six votes cast?
Mr. Preblud. I said it was by players, Mr. Chairman.
Senator Ervin, You said you got six responses.
Mr. Preblud. Six clubs responded.
146
Senator Ervix. Yes ; but you only sent one to each club.
]Mr. Preblud. ]Mr. Chairman, there are 11 franchises. Now, each
franchise was sent a telegram, all right? Each franchise has 12,
between 10 and 12 players on it.
Senator Ervin. Yes.
Mr. Preblud. Now, they were asked to take a vote of the players
on their franchise.
Senator Ervin. And the vote was what ?
Mr. Preblud. Forty-eight players responded favorably; 15
responded negatively.
Senator Ervin. And that is from six clubs, and the other five
clubs you never heard from ?
Mr. Preblud. The other five clubs did not respond.
Senator ER\^x. Didn't respond at all. So far as you know, thej^
never took any vote ?
Mr. Preblud. I am not sure of that.
Senator Ervix. Okay. Anything further?
Call the next witness.
Senator PIart. Thank you very much.
Mr. Jones. I would like to give this statement to the reporter.
Mr. Kuchel. ]Mr. Chairman, I would like to ask Mr. Eick Barry
III, distinguished American basketball star also, from the New
York Nets of the ABA to testify.
STATEMENT OP EICK BAERY III, PLAYER WITH THE NEW YOEK
NETS BASKETBALL TEAM OE THE AMERICAN BASKETBALL
ASSOCIATION
Senator Ervin. You may proceed.
Mr. Barry. Mr. Chairman, gentlemen, I am Rick Barry, profes-
sional basketball player with the New York Nets of the American
Basketball Association. I am honored to appear before you today
and I am pleased to express my wholehearted endorsement of S.
2373.
To give you a little background information, I graduated in 1965
from the University of INliami, at which time I began my profes-
sional basketball career with the Golden State Warriors of the
National Basketball Association. I played with the Warriors for the
1965-66 and 1966-67 seasons. Wlien the American Basketball Asso-
ciation was formed in 1967. I desired to play with the then Oaldand
Oaks. I therefore sat out the 1967-68 season. The Oaks subsequently
moved to Washington, D.C., where they were known as the Wash-
ington Capitols. I played with that team'f or the 1969-70 season.
Last season I played with the New York Nets of the ABA. I will
begin my second season with that team this year.
Mr. Chairman, I have played in both leagues and I have had
clubs in the two leagues compete with one another to obtain my
services as a player. I have personally capitalized on the bidding
war between the two leagues to the point where I will be compen-
sated, in the next few years, with much more money than I ever
anticipated making while playing professional basketball. I am
quick to realize, however, that the amount of compensation has cer-
147
tainly reached a saturation point. For it to continue as it would be
very detrimental to the game of professional basketball.
I am concerned about this because basketball has been very good
to me and I would hate to see anything happen which would do
harm to the sport. It is for this reason that I am in complete accord
with the proposed legislation for merger.
I am well aware of the financial instability of the majority of
professional basketball teams. The only way that this situation can
possibly be eliminated would be to have a merger. The astronomical
salaries that are being handed out to untried ballplayers has done
nothing but weaken all of the teams financially, not to mention caus-
ing hard feelings among the veteran ballplayers.
Also of great concern to me is the plight of the professional bas-
ketball fan if a merger does not come about. I can see only one way
the team would be able to increase their income to meet the salary
demands as they presently exist — raise the price of tickets. Ticket
price increases probably would get to a point where the average
person could not afford to attend a pro basketball game. I would
hate to see this happen.
I think that basketball in the 1970's is on the verge of becoming
even more popular than it is today. The problems that would arise
from a bidding war would do nothing but jeopardize the future of
the game, that is, teams folding and going out of business, fran-
chises being moved to other cities on the spur of the moment — as
was the case in the Oakland-to-Washington, District of Columbia-
to-Vin::inia situations in wliich T was personally involved. Addition-
ally, the image of professional basketball and the ballplayers is not
enhanced by all the publicity attendant to the astronomical salaries
being paid and the leverage being exercised by some of the players
in commanding these salaries.
Once again, I speak from experience because I am well aware of
the publicity that I have received, even though I think I have been
misjudged in a great many areas.
To be perfectly honest with you. Mr. Chairman, I feel that any
ballplayer opposing the merger is definitely looking out for his own
best interest rather than for the good of the game. The commotion
being generated by the NBA Players Association regarding certain
elements of the offer by the NBA owners to their players is of such
minor importance when you look at the overall picture of profes-
sional basketball and its position in this country today.
To digress from the text a little bit, I think it is wonderful if you
can get all the side benefits that you can but I certainly would like
to see someone around to be able to pay them.
In my opinion the offer presented to the NBA Players Association
on behalf of the NBA is equitable. The concessions being made by
the NBA are certainly unique in professional sports. For instance,
the option clause for veterans in future contracts will no longer be
used. Just this one point alone certainly shows that the NBA is
trying to act in the players' best interest and in the best interest of
the sport.
In addition, I would like to point out that it has been mentioned
that we basketball players have been referred to in the same breath
with doctors and lawyers and other people of other professions and
148
I do not consider myself in the same vein as a doctor or a lawyer or
people in the regular business world, mainly for the reason that
people will always need doctors and lawyers and they will have to
go to them if they want to get services performed.
I perform a service — go out and play a sport — but people don't
have to come out and watch me play if they are unhappy with the
situation and I do feel that the foundation of sports is, definitely,
competition as has been mentioned many times here before. I have
had a great deal of personal experiences into the workings of pro-
fessional basketball, much more so than any player I think in either
league because of the fact I at one time was a part-owner of the
Oakland Oaks franchise. So I did get an opportunity to look into
the workings of professional basketball. Also in my association when
I was in the NBA in San Francisco, I had a very unique position
with the ower there. I did get an opportunity to know what was
going on internally.
I do think a common draft is necessary for the good of the game
of basketball. I know when I came out of school there were not two
leagues competing for my services and I was drafted by the San
Francisco Warriors and I was delighted to have an opportunity to
earn $18,000 a year to go out and play the game of basketball, and I
wasn't too concerned about the fact there was nobody else bidding
for my services.
I also feel that salaries nowadays are at a level that is more than
fair in relation to the ball club and I definitely feel it has gotten
completely out of hand and the clubs now are paying much too
much mone}' and it should get to the point where it is at some type
of a level that is economically feasible.
Senator Ervin. You say on page 3, "Any ballplayer opposinjj the
merger is looking out for his own best interest rather than for the
good of the team."
Don't you. think that is a very natural thing for a person to do,
look after his own interests ?
Mr. Barry. Yes: it is, sir; but I don't think it is necessarily true
to bite the hand that feeds you.
Senator Ervix. Don't you think the owners of these clubs are
looking after their own interests when they are asking for the pas-
sage of a law which would enable them to acquire new players with-
out paying what you call astronomical prices ?
Mr. Barry. I think — they are trying to make a dollar as well as
anybody else.
Senator Ervin. "\Yliy is it wrong for players to look out for their
own interests and all right for the owners ?
Mr. Barry. I think it is fine for both sides to look after their own
best interests but not when it comes to the point where it jeopardizes
the future of the sport and I think the merger is the only way to
salvage it.
Senator Ervix. Don't you think what has made this country great
is the free enterprise in which every man looks after his own inter-
ests?
J\lr. Barry. To a point.
Senator Ervin. Yes. You know, at one time the Kaiser of Ger-
many called all the men of the Fatherland together and said that
149
instead of their lookinc: after their ownselves and their families that
they ail look after their o\Ynselves and their families that they all
look after the interests of the Fatherland. It looked like the proposi-
tion ^vas going until there was an old German who arose aiid said
this : "Until men are built like angels with hammer and chisel and
pen, we shall work for ourselves and our women forever, and ever,
amen," and I think that is a fine thing to do and I praise a player
that looks after his own best interests and I don't blame the man-
agement for looking after theirs.
Now, let's see, you played with the San Francisco Warriors?
INIr. Barry. Yes, sir.
Senator Er\^n. And then vou left them and you played for the
Oakland Oaks?
]Mr. Barry. That is correct.
Senator ER^^N. You made a very great record there scoring the
average high of 34 points a game, I believe, at the Oakland Oaks ?
:Mr. Barry. That is right.
Senator Er^tlx. Then vou came to Washington, played with the
Caps?
Mr. Barry. That is right.
Senator Ervin. And then you went back to the San Francisco
Warriors ?
^Ir. Barry. No : that is not correct.
Senator Ervin. Where did you go then ?
Mr. Barry. I was traded to New York when the franchise of
Washington moved to Virginia.
Senator ER\r[N. Oh, yes; that was the one that was moved down
here and then the league paid them to move on out of here so that
the people in the District would have no basketball team. They took
them back to Virginia?
JNIr. Barry. Well, they have a basketball team. They have the Bal-
timore Bullets.
Senator Er\t^n. Baltimore is 40 miles away.
Mr. Barry. They didn't support the team that was here.
Senator ER\T[]sr. Wliere are 3^011 playing now ?
]\Ir. Barry. New York.
Senator Ervin. So, by your great skills and by your ability to
transfer from one point to another, you have done very well finan-
cially and you have merged. I say, you are a great player, but you
have been able to do that because under the system that then pre-
vailed they couldn't get together and tell you you could only play
for one club; isn't that so?
]Mr. Barry. No, that is not correct.
Senator Ervin. Well, in your statement you say that you had been
able to prosper financially because you were able to play in both
leagues and had clubs in the two leagues competing to obtain your
services as a player?
Mr. Barry. I was able to increase my salary. Of course, that is not
the reason I made the moves, though, because they couldn't get
together. I made my move because I became a free agent in the
NBA.
Senator Erwn. You have reached the point that you feel like you
are paid too much now, is that
150
Mr. Barry. To be perfectly honest, sir, that is exactly right. I
think I am making a lot more money than I should be paid for
playing basketball.
Senator Ervin. You know, if this act had been in existence and
this merger agreement had been in existence at the time covered by
your playing as a basketball player, you wouldn't have been able to
move around from point to point, would you ?
IMr. Barry. That is not true.
Senator Er\^n. Well, you said you were able to get increased sala-
ries by moving?
Mr.* Barry. That wasn't because of moving.
Senator ER\^x. Well, all teams competed for you ?
Mr. Barry. That is not correct, either.
Senator ER^^N. Well, you were a very desirable basketball player
from all I understand, that you are one of the most distinguished
basketball players in the game.
Now, under this merger agreement you could not move.
]Mr. Barry. That is not correct because I already did move one
time. I became a free agent when I was in the NBA, moved from
San Francisco to Oakland.
Senator Ervix. But this agreement wasn't in effect then ?
Mr. Barry. That agreemeiit still wouldn't have any effect. In fact,
I may do tliat this year once my contract is over.
Senator Ervin. Mr, Barry, under this agreement you can't change
teams as long as the team that you originally were with is willing
to meet their offer
]Mr. Barry. That is not true
Senator Ervin (continuing). Of salary?
Mr. Barry (continuing). To my understanding. This agreement
had not been agreed upon as far as this point and this is something
that has to be negotiated.
Senator ER^^N. I know, but if this agreement is adopted, this is a
proi:)Osal that tlie owners make?
]\Ir. Barry. Right.
Senator Ervin. This is the only offer they have made to the play-
ers?
IMr. Barry. Eight. That doesn't mean it is the final one.
Senator Er\t[n. And if this offer was accepted and became bind-
ing, it provides expressly that after a man becomes a free agent —
which I think is a very erroneous term to use, since he is not a free
agent — that he cannot move from one club to another as long as his
club is willing to match the other club's offer ?
INIr. Barry. Ninety-five
Senator Ervin. And it also provides that a club that offers him
more than his club is willing to pay can be penalized for employing
him. So what you are asking, Mr. Barry, you are asking that the
Congress pass a law under whicli those hereafter entering professional
basketball, having basketball skills, be denied the opportunities which
enabled you to become a famous player and enabled you to attain a
salary which you say is greater than you ought to have?
IMr. Barry. Sir, I think you are incorrect in that what you have
here, trying to give any endorsement to this bill permitting a
merger, has nothing to do with the agreement or proposition that
151
the NBA has proposed to the NBA Players Association. That has
nothing to do with this bilL
Senator Ervin. If I understood you clearly, you objected to the
large sums being offered to rookie players ?
]Mr. Barry. Because I think it is jeopardizing the future of the
game.
Senator Ervin. I say regardless of the motive, you want to have
legislation and an agreement made which would deny in the future
to other young athletes the opportunities which you had in the past?
Mr. Barry. That is not true. They are not denying them an
opportunity. A youngster coming out of college would still have an
opportunity to make a very substantial salary, much more than he
would be able to make if' he went out and had to earn a living
instead of playing basketball, and I think he should feel very fortu-
nate that he has this opportunity.
Senator Ervin. Yes. But you want his opportunities to be limited
as compared to the one you enjoyed?
Mr. Barry. Into the realm of reality, yes, because he hasn't played
the game. If he proves himself, then he should get paid.
Senator Ervix, So you want to give power, rather autocratic
power, to a group of 'men, tlie owners, who you said have been
acting economically foolishly and spending more money than the
sport justifies?
Mr. Barry. That is your opinion, sir.
Senator Ervin. Well, I think it is yours, too. At least that is the
opinion I draw from your testimony.
Senator Hart. I think we are all better for having heard from
]\Ir. Jones and Mr. Barry. Thank you very much.
Senator Tunney. I want to thank you, Mr. Barry, and also want
to thank you, ]\Ir. Jones, for your testimony. I would like to ask Mr.
Barry what he feels about the team compensation for the loss of a
free agent. I recognize that you have testified and that Mr. Jones
had testified that the team compensation for the loss of a free agent
is not subject to provisions of this legislation because this legislation
only deals with the merger and this is something to be negotiated
between the Players Association and the owners. But what is your
expression on compensation?
]Mr. Barry. To be perfectly honest, I feel that it is equitable. I
think that some compensation should be made. I have experienced
this myself in my situation with San Francisco. A great many teams
are built around one individual and you take that one individual
away from a team and that team will suffer a great deal of financial
losses. And I think it is only fair that something be worked out that
would be an equitable situation so that the team can be compensated
if this were to take place. I think it is just good for the sport.
Senator Tunney. Was any compensation paid to any one of the
teams that you left?
jNIr. Barry. No; except for, the trade, they worked out an agree-
ment, I imagine, my trade from Virginia to New York and that was
worked out on an amiable basis.
Senator Tunney. Do you think it would have limited your free-
dom to move from one club to another if there had been team com-
pensation ?
152
]Mr. Barry. I don't believe so. I did move and there was none paid
and a draft choice was given np for my right when I was traded
from Virginia to New York, first draft choice, and a substantial
amount of money was paid and I was able to move.
Senator Tunney. I understand that you can look at this problem
from a double perspective, the perspective of the player and also^
from the perspective of having had an interest at one time in owner-
ship in one of the teams?
INIr. Barry. That is correct.
Senator Tunney. That is correct ?
Mr. Barry. Yes, sir.
Senator Tuxney. Do you still have an ownership interest in one
of the teams?
Mr. Barry. No, sir.
Senator Tunney. Well, I want to thank you very much, Mr.
Barry. I think that your testimony has been very helpful.
Senator Hruska.' iSIr. Barry, a little while ago it was suggested
maybe under this merger there would be fewer teams and therefore
fewer jobs. As a matter of fact, the bill that applies to football as
well as to basketball says that the merger can occur if such an
agreement does not decrease the number of professional basketball
clubs so operating. That woidd prettv much take care of that,
wouldn't it?
]Mr. Barry. Sir, the only way the teams that are in existence now
can continue to be in existence in the future, have any hope at all,
would be through a merger. Without a merger it is imminent that
teams will definitely fail.
Senator Hruska. You think it is problematical that they could
stay at the present level of clubs and jobs without a merger ?
Mr. Barry. I don't believe that very many teams could, both NBA
teams as well as ABA teams.
Senator Hruska. Now, is it true that you could not move or
change to another club if this merger occurred? You could move to
another club, couldn't you?
Now, there is a provision as I understand it that the merger is
separate and apart from the agreement that is being negotiated
between the parties ; isn't that w^hat you said a little bit ago ?
]Mr. Barry. Yes, sir. I am here to support the bill, not the propos-
als that have been put forth by NBA to the NBA Players Associa-
tion. This is something aside from that and if under the circum-
stances the way they are right now — in fact I am involved in a
situation whereby if something is not worked out between the New
York Nets and San Francisco Golden State Warriors, that I am
playing my option year out right now with the Nets and if some-
thing is not worked out between these two people, I will go back to
the Golden State Warriors next year; so I will have an opportunity
to move and it would be the same case if a merger went through.
Senator Hruska. But the agreement is something that is worked
out between the clubs and the players ; that is not in the bill here, is
it?
Mr. Barry. No; it isn't.
Senator Hruska. The working conditions and terms, that is some-
thing you can adjust and negotiate?
153
]Mr. Barry. That is correct.
Senator Hruska. As I understood the proposal of the NBA, it
was that if a player, number 1, is with club A and gettmg $100,000
a vear, and some other club offers hun $150,000 a year, the home
club can keep him if they match the $150,000 ; but if they don't he
can move. That is the way the present proposal is. It has not been
approved vet but that is the way the proposal reads ; doesn't it?
Mr. Barry. Yes, and in some ways it seems very fair to me
because of the fact that through experience with the ball players I
have known who have made moves and increased their salaries, the
main reason thev threatened to move or go someplace else is to
increase their salary and I am sure the overwhelming majority of
the ball piavers faced with that exact same situation if they were
e-iven the same amount of money offered by somebody else by the
team they are presently with, they would remain with the team and
be verv happv.
Senator Ervix. That is a good acid test, isn't it? :Maybe the pres-
ent owner of the club might not think that player is worth that
much but if he finds in the circumstances that the second or third
club, that they want to pay more, he gets that judgment corrected a
little bit, doesn't he?
]Mr. Barry. Yes, sir.
Senator Hruska. The Players Association is pretty much like a
union, isn't it?
jMr. Barry. Well, ours isn't very strong but we are trying to make
it better but it is very similar, yes.
Senator Hruska. It has some of the principles of a union?
jNIr. Barry. Definitely.
Senator Hruska. It is not a labor union: you fellows don't work;
you play. That is why they call you players ?
jNIr. Barry. That is exactly right.
Senator Hruska. You like the game well enough and are paid
well enough to play?
Mr. Barry. If you like it enough it is play.
Senator Hruska. The thought I had in mind, we talk about free
enterprise and then look around America and try to find where it is.
Certainly the working man hasn't got it and there are millions of
workers in labor unions. He hasn't got much free enterprise.
I would think in a situation like this it would be very important,
retention of as much free enterprise as possible, but it might also be
necessary to give up some aspects and some attributes of free enter-
prise in return for other benefits like the stability of the game and
the increase in the number of player jobs and clubs and one thing or
another.
Mr. Barry. As Mv. Chairman pointed out so very vividly this
morning, that comparing us to serfs, in the olden days who are
under servitude, if that is the case with us, I am a very happy slave.
Senator Hltjska. Happy slave. Well, we hope
]Mr. Barry. If that be the case.
Senator Hruska (continuing). We hope 3'our happiness increases
as you go along. Thank you very much.
Senator Erm:x. Wait just 1 minute. Under this proposal, if a man
is getting $100,000 for playing basketball for one of the teams in the
154
league and he is offered $150,000 to switch to another team, and the
home team is miable to come up to that figure, he can switch if the
other team is fool enough to carry out the proposition. But if they
carry out the proposition under this provision, arbitrators could
thereafter compel him to forfeit $1 million, $2 million, or $3 million
or some players to the team from whom they took the man. Do you
think anybody is going to offer to hire a player away from another
team when they are going to suffer such a penalty as this and not
know at the time they do it what the penalty is going to be ?
JSIr. Barry. I think some of the owners would be willing to take
that chance. I don't think the penalty is going to be that severe.
Senator Ervin. He is going to have to be an awfully good player.
You say you used to own stock in one of these clubs ?
Mr. Barry. That is correct.
Senator Ervin. Which one?
Mr. Barry. Oakland Oaks,
Senator Ervin. I hope you sold it at a profit?
Mr. Barry. No, I didn't because there wasn't a merger. There
wasn't a merger sooner.
Mr. Ervin. You lost because you didn't have
Mr. Barry. A merger.
Senator ER^^N. The antitrust law exempts
Mr. Barry. No, because they didn't have a merger.
Senator Ervin. The same thing. The merger is what the antitrust
law is aimed at.
Thank you.
(Letter' from Eick Barry follows:)
Hempstead, Long Island, N.Y., May 2, 1912.
Senator Sam J. Ervin, Jr.,
Chairman, Subcommittee on Antitrust and Monopoly of the Committee on the
Judiciary, Senate Office Building, WasMngton, D.C.
Dear Mr. Chairman : I am Rick Barry, a professional basketball player
with the New York Nets in the American Basketball Association.
On Tuesday, September 21, 1971, I testified before this Committee and ex-
pressed my wholehearted endorsement of S.2373. At this time I would like to
have read into the record an amendment of my original testimony. I still
wholeheartedly support merger legislation. I believe that a merger of the two
leagues would definitely be beneficial to professional basketball. However, after
carefully reviewing and considering the testimony of various witnesses over
the past few months, I am firmly convinced that the passage of merger legisla-
tion without eliminating the reserve, option or any other type of clause that
restricts a player's freedom of movement would be extremely harmful.
In analyzing the NBA owners' proposal to the NBA Players Association, pro-
viding for a right of first refusal as well as a compensation factor, I can
clearly see how this takes away freedom of a player to fairly negotiate a con-
tract.
Mr. Chairman, I wish to thank you for this opportunity to clarify and, in
one respect, amend my original statement.
Respectfully,
Rick Barry III.
Senator Kuchel. Sir, may we call Robert Nathan, distinguished
economist ?
Senator Ervin. You may proceed, Mr. Nathan.
155
STATEMENT OF ROBEKT NATHAN, WASHINGTON, B.C.
Mr. Nathan. Thank you, Mr. Chairman and members of the com-
mittee. In the interest of time, if I may, sir, I would ask that my
complete statement with the annexes of tables and charts be included
in the record and I would like, jMr. Chairman, just to summarize
and emphasize the high points of the testimony, if that is acceptable.
I will proceed, then, with a brief summary. Let me confine my
observations to just the few points that I think are pertinent here
with respect to this merger. First of all, Mr. Chairman, I would like
to talk about professional sports in terms of their business charac-
teristics and competition as this is understood. In my judgment, and
I have testified before in sports cases, I do think that the profes-
sional sports are characterized by business considerations similar to
most other sectors and activities in our economy. They are subject to
problems of incentives, problems of markets, problems of costs,
problems of profits and problems of losses, and they are subject, of
course, to competition among the teams.
Certainly, competition is a characteristic of our competitive
system with which I agree very fully and I have the greatest respect
for the competitive consequences of our free, or relatively free,
enterprise system.
Having said that, however, Mr. Chairman, I think we have to be
realistic and recognize that hi our society we have very few sectors
that are truly free competitively in the fullest sense oif the word. I
might say that even goes for agriculture, which at times in the past
was regarded as probably the most competitive and the most flexible
element and sector of our society. But in the last 30 or 40 years,
under all kinds of pressures and claims, we have introduced degrees
of rigidity in agriculture in terms of production controls and price
supports and things of this nature. Some of these I am certainly not
against, jMr. Chairman, but I do believe that we ought to recognize
that we do not live in a nice simple polarized society in which you
have absolute monopoly on the one hand and absolute free competi-
tion on the other hand.
From an economist's point of view, professional sports are quite
distinctive and the very existence of a league distinguishes that
activity from most other sectors in our economy.
The steel industry does not operate in a sense as a league with
rules among the steel companies. The department stores do not oper-
ate in that way. The automobile manufacturers do not operate in
that way. But whenever you have organized professional sports
where there are leagues, it is inevitable that there be certain
arrangements and relationships which are set by the institution, by
the organization, by the league itself.
For instance, I do not see how one can conceivably have an orga-
nized basketball league without someone setting schedules. "VMio is
going to play whom, when and how many games and how often will
there be games and when does the season start and season end? This
kind of a set of questions cannot possibly be left to each individual
156
member of the league or you would have utter chaos, and you would
not have so-called organized sports, and you would not have profes-
sional leagues. -r .i • i n
Similarly as far as the number of players, I thnik we can all rec-
oo-nize that you cannot very well have some teams operatmg with six
basketball players and some with 16 or 30 and let it go at that, bo
what we do have are certain kinds of rules set voluntarily or by
maiority decision among the team owners as to certain kinds ot
arrangements and that is what is meant by organized leagues, and -
that is the way they function. . .
Similarly with respect to plavoffs, with respect to bargaining
between labor and management, with respect to arrangements with
television and things of that nature. I believe that we have to recog-
nize, then, that the professional sports with their leagues possess
some kinds of unique characteristics which are distinctive from
monopoly on the one hand and from total free enterprise on the
By'the way, we must recognize that all other sectors of our society
are Vlistinctive, too. I happen to have testified in a great many
instances before regulatory agencies all the way from electric utili-
ties, which are absolute monopolies by the very nature of their oper-
ation and investment, to barge industries where there can be verv
considerable competition; the trucking industries; to all kinds ot
activities where there are different characteristics. And, by the way,
Mr. Chairman and members of the committee, I would also like to
say that in the real world in which we live, if we are rigid m our
concepts of competition over time, we make horrible mistakes, and I
could not suggest a greater example than the airline industry.
Wlien we had DC-S's, the idea of very substantial duplicate
facilities and, in some routes, four, five, or six carriers certificated
made a lot of sense, but when you begin to operate with 74^ s or
expanded DC-8's or DC-lO's, then you are in an entirely different
situation. Despite the fact that we have had somewhat of a recession,
it has not been of that magnitude as to bring about m most competi-
tive industries the kind of^disastrous financial results that are facing
the airlines. We have to look at those competitive situations m a
meaningful proper way and, in my judgment, what we need to do is
take a good look at this industrv and see what the results are. _
Let me brieflv run through somie results and I have, Mr. Chair-
man, over here on the right, four or five charts which will save us
The first chart is not in my prepared statement as a chart. Mr.
Chairman, there were in the 4 years between the seasons of 1967-68,
through the season of 1970-71 in the American Basketball Associa-
tion fl teams or 44 team years of results. In other words, with 11
teams for 4 years, we could have gotten 44 observations.
^Yhel\ we finished this report we had reports for 39 team years. In
other words, we missed a total of 5 years where the data were not
available and in large measure I think the data were not available
primarily because of the difficultv associated with the teams moving
so much. But if we look at that chart we see, Mr. Chairman, and
members of the committee, that of the 39 years of operations among
these 11 teams, there were 39 years of loss. Not one single year ot
profit for any ABA team.
157
PROFITS AND LOSSES OF ABA TEAMS
1967-68 THROUGH 1970-71
THOUSANDS OF DOLLARS
PROFITS
750-
999
500-
749
250-
499
0-
249
FREQUENCY DISTRIBUTION OF OPERATING LOSSES
THOUSANDS OF DOLLARS
NUMBER
0-249
250-499
500-749
750-999
1,000 AND OVER
LOSSES
NUMBER OF TEAMS
SOURCE: AMERICAN BASKETBALL ASSOCIATION AND MEMBER TEAMS.
And we break those down and of those 39 losses we have six down
at the bottom there. The lowest bhick line shows ()-year experiences or
team years in which losses were betwen zero and a quarter of a mil-
lion dollars in the year. The next line, the longest line is 18. There
were 18 years when losses were between a quarter of a million and a
half million dollars. The next one is 5 team years when losses were
between half a million and three quarters of a million dollars. And
then there were 8 team years with losses between three quarters of a
78-465 O— 72— pt. 1-
-11
158
million and a million dollars and 2 team years with losses of a mil-
lion dollars and over. Not 1 single team year with a profit.
Now, I think one might very well do a more intensive job with
the financial statements than we were able to do because we had the
reports coming in through the league. But we tried to study these
reports, gentlemen, as carefully as we could, and as far as I can see,
I believe that the data are sufficiently representative and sufficiently
accurate to reveal the financial instability and the financial conse-
quences of operations of the ABA in the last 4 years.
I might say to the best of our ability we tried to check and to see
what happened to deferred compensation and we prorated it by the
years of the contract and I think that is what most of the teams did,
although I am not sure.
Some teams may not have put it in. If they did not put in the
deferred compensation prorated by the years of the contract, their
actual losses would have been even larger than reported. But those
are the results of the operations of ABA for the years 1967-71.
Profits and Losses of NBA Teams,"
1964-65 Through 1970-71
Thousands of dollars
1,000 1
750
LOSSES
^S^S;SSS^'^S5^\^^^'Mi'SM4-.' ^-^^
0-
249
0-
249
250-
499
500-
749
750-
999
1
^'^i^^^Sulb^l^v-C^^^^i^^'^v^^^i^^^'^^
1,000
5 10 15 20
Number of Teams
Source: National Basketball Association and member teams.
Testimony of Robert R. Nathan, economist, in support of basketball merger.
Frequency distribution table is shown in annex B-2 of this testimony.
159
The next chart provides the same information for NBA but it
covers more years. It covers 7 years, 1964-65 through the years
1970-71 for the NBA teams. By the way, if you are interested in
following the numbers, those numbers appear on page 34 of my tes-
timony in tabular form. In those 7 years there were 81 team years.
The NBA, I think, has 17 teams now and before that there were less,
14 for 2 years. Before that there were ten, but if we add up all the
teams for each year from 1964-65 to 1970-71, we have 81 team
years or observations and we got data for 67 out of the 81, which is
over 80 percent of the observations.
There we found that out of these 67 team years, 25 showed profits
and 42 showed losses. And there we also show the distribution of the
profits. For instance, to take the profit side just quickly : There was
one profit which was over a million dollars in a year; there were
three that were three quarters of a million to a million; two, a half
million to three quarters; and the like, and you also see the losses
here. Again I would say, Mr. Chairman, and members of the com-
mittee, no one, in my judgment, could look at these figures and con-
clude anything but indications of very serious financial results in
terms of inducing substantial investment.
It is a very clear financial picture which in my judgment, Mr.
Chairman and members of the committee, poses the most serious
problems of all.
Now, one might very well ask in a free system where a man can
invest his money anywhere he wants why there have been purchases
of franchises. Well, I somehow hope today that in Boston there
might be a Washington purchaser of the Washington Senators.
Sometimes people do engage in investment in sports entities for
community service purposes, for community pride and the like. But
I am convinced as an economist that over time that is a pretty weak
reed on which to depend for a stable and expanding and sound eco-
nomic activity, whether it is sports or manufacturing or services, or
trade, whatever it is. As I see the picture, sooner or later the people
who are willing to risk large amounts of funds for this kind of
activity will diminish and diminish, even though there are certain
tax advantages where one can offset the losses from sports enter-
prises from other activities.
But I have yet to know any businessmen — I think I know a lot of
them — who enjoy losses, no matter whether they are allowed to offset
them. They would rather have profits on all their enterprises. I
believe the chances of extensive and substantial and vigorous sur-
vival of the investor owner is not bright, providing this financial
picture is likely to persist, and I think it is likely to persist. Unless
something is done institutionally and organizationally it may por-
tend a substantial reduction in the number of teams, in the number
of players, in the number of franchises.
Now, it seems we must ask ourselves why is it that we have this
rather unfortunate profit picture? Mr. Chairman, you have repeated
a number of times today very properly that this is a popular indus-
try or it is a popular activity. We have here in my exhibits, here
near the end, evidence on attendance and attendance has moved up
very, very well. As a matter of fact, the total attendance of the
NBA in the last four years and the ABA almost doubled.
160
Xow. there were some increases in teams in the XBA and on a
team basis attendance did not rise quite that much but it was pretty
good and on a game basis there is an upward trend in attendance,
too. So, apparently, it is not the lack of people interested in basket-
ball that results in these adverse losses.
Maybe the ticket prices ought to rise but I think we would all
share the disturbing feeling or consequences that the higher the
ticket prices, the less access the poor people or the middle or lower
income people have to enjoy this sport. That certainly is not a desir-
able feature and we do know something also about elasticity of
demand. I think it is entirely likely that if basketball raised its
prices too much, it might get less revenue, because as you push your
prices up and your demand curve responds, you get less attendance.
You can see this in mass transit. All over the country they raise
the fares to pay the higher cost and then you have less riders and
unit costs increase and then you have a higher fare and that means
less riders again, and before you know it, your elasticity of demand
and higher fares kills you and I do not think higher fares offer the
solution there.
Now, let us take a look at one of the major problems that appears
to be the issue here. That is a subject that has been discussed so
much today and has to do with pay. Let me look at the next chart. I
have three charts here which I will run over very, very quickly.
This chart, which appears in the report (see p. 214) shows the
average starting salaries of draft choices in the XBA for the last 10
years by seasons. That is of the players who literally played and
stayed m for a year. I think you can see here what has happened,
Mr. Chairman and members of the committee. A^^ien the ABA came
into being the curve of this chart changed totally and the steepness
of the rise, and you can see the figures going up from roughly $7,000
to over $45,000." This is the average of the draft choices and what
happened is when the two leagues began operating simultaneously in
1967 and 1968 you had an almost perpendicular rate of increase, so
that we have a very, very substantial rise in the rate of increase in
the starting salaries of these players.
Xow, let us look at the next chart (see p. 216) the same one that is
in my paper on page 40. This shows the average rookie salary in the
ABA for 1967-71. both the top three player category and those that
are the rest of the team, and here we see a rather substantial rise
from 1967 to year 1971. I will not bother to go through the figures
but you can see there is a very substantial rise among the top play-
ers, rookies, relative to those who are the rest of the team down
below.
Now we also have the same kind of a chart for the ABA. Here
you see the average annual salary of the rookie players in the top
three, the rookies that are in the top three in each team and the rest,
and we see again a very, very substantial rise, far beyond the rise in
the cost of living.
Now, as an economist who is very much interested in the competi-
tive system and is strongly in favor of competition, and also, Mr.
Chairman, T might sav I have done much work for trade unions and
on behalf of trade unions in their negotiations, I do believe that one
161
must look at these relationships in the context of a stable and con-
tinuing economic activity.
• "\^^lat appears to have taken place is that there has been a sizable
investment in basketball. There has continued to be a hopefulness of
survival and financial viability and in the struggle and strive for
survival, for success, for viability, there has been a drive to hire
some of the new rookies who have good names in their college pic-
ture and to pay them amounts which I think, ]Mr. Chairman, and
members of the!^ committee, are probably characterized as astronomi-
cal.
I ask you to look at table 6 on page 41 of my testimony (see p. 217).
There, 14 rookies are listed, not by names, and^ frankly, Mr. Chairman,
I cannot tell you names. I do not know myself. They were given to us
in confidence and identified from 1 through 14.
The average compensation per year over the term of the contract
of these 14 people is $117,000 a year. In other words, if you take
rheir salary, say. on a 3-year contract and divide the total salary by
three, take the annual average, and take the deferred compensation
and divide that by three, you arrive at some of the figures that run
all the way down.
The lowest is $47,700 and the highest is $317,000 a year.
Senator Ervix. You picked out the 14 high ones. ^A^iat about all
of them ?
Mr. Nathax. Well, I have those here. We show the average of
$46,000 there as the average first year pay of the rookies and that
chart is three pages before this. Mr. Chairman, it is in here.
Now, what it seems to me has happened from an economic point
of view, in this sort despite trying to get out of this morass of
higher attendance, higher revenues, and yet considerable losses. And,
by the way, Mr. Chairman, if you look at the annual loss figures
here, there" is no improvement trend. You can look here at the ABA
figures on page 33 (see p. 209) of my own report which shows the 11
ABA teams and it shows their profits by team in 1970-71. Most of
them are worse than 1967-68. With the Vising attendance there has
been a heightening, let us say, of the losses. "Wliat appers to me is
that in a strong tendency to try to survive, you have had a phenom-
enal bidding up of the entering players and in some cases it proves
to be failures and in some it proves to be successful, but an
awful lot of them, I think, are so costly relative to the players, vet-
erans, it is almost unfair to the veterans. And besides, Mr. Chairman
and members of the committee, no basketball team has 12 superstars.
There are not 12 superstars available, and certainly not every year,
so you have got a limited supply you are driving at ancl the other
members, nine or 10 on the team, are inevitably the victims of this
kind of a vigorous, kind of uncertain, competition to get out of this
situation in which they exist.
By the way. ^Ir. Cliairman. I am for people getting high incomes
for high performance, but as we look at the proposal, and it has not
been adopted by the players unions, it would provide for only a 1-
year contract for a rookie under the draft proposal and a 1-year
option thereafter, and then he w^ould be a free agent.
Now, as was pointed out by the two basketball playes who pre-
ceded me, and you said properly that they could be held by their
162
club, if you are getting $25,000 or $30,000 a year as a rookie for the
first year or 2 and somebody offers you $150,000 and your employer
gives you $150,000, this is not bad, certainly compared to baseball.
And 1 think frankly, INIr. Chairman, to compared the provisions
proposed to the players here with the reserve clause in baseball is
utterly unrealistic. In baseball you are hooked, and I testified in the
Flood case on behalf of Curt Flood, and I was against that provi-
sion because in baseball, once they have got you, you cannot play
with another team unless they transfer you, or you are out for life.
Here what you have is a 1-year contract of a rookie and 1-year
option and then you are a free agent subject to this meeting of the
highest proposal and the matching of the offer.
These are the highlights, Mr. Chairman and members of the com-
mittee. A lot more data is in this report. In the interest of time — I
have taken too much already- — I am just summarizing it, but I
think, as an economist, that you have an industry here which in my
judgment, needs some kind of leeway. I bring up, because all of you
know about the support pi'ograms in cotton and other things, other
industries where we have subsidies, such as the maritime and other
industries, and I do not see these susidy programs as a monopolistic
approach. I think what in essence the law is saying is you can get
together only for this purpose.
Senator Er\t^x. Well, I do not know whether you studied the foot-
ball field or not or whether you have had occasion, but my informa-
tion is there are virtually no club switches in football because they
are subject to a penalty which the Commissioner can impose on them
and they do not know what the penalty is going to be, and so they
do not switch.
Mr. Nathan. That is correct.
Senator Ervix. And clubs do not try to get them to switch.
Mr. Nathan. Well, I looked at these provisions. I am against the
reserve clause, INIr. Chairman and members of the committee, and I
would not be here testifying today, to be very honest with you, if I
thought that the basketball league would propose the equivalent of
the reserve clause. "Wlien I read this provision of arbitration as to
compensation and it says in such explicit words as these that the
arbitrator shall not award compensation so substantial as materially
to discourage the movment of players from one club to another,
then I think any arbitrator who has any sense of objectivity and
fairness could not set the penalty or the compensation so high as to
preclude the players from moving. It is very clearly said you must
not set a compensation at the level as materially to discourage the
movement of players from one club to another.
Senator Ervik. It says here in an article in the INIaine Law
Review, — which is a very illuminating article on this whole question
The end result for the option clause has the same effect as reserve clause
because the player still is tied to the club with which he first negotiates.
Mr. Nathan. For 1 year.
Senator Erm;n. Oh, this one
Mr. Nathan. This option is a 1-year option.
Senator Ervin. I know.
163
Mr. Nathax. It is a 1-year option.
Senator Ervix. But the point is this. Is a club going to be fool-
hardy enough to entice a pLayer who is an alleged free agent to sign
up with them when they can be subjected to an undefined money
penalty and undefined assignment of player contract penalty, or an
undefined loss of choices or a combination of all those three? Is that
not a penalty which is going to defer clubs from trying to persuade
even free agents to switch ?
Mr. Xathan. Well, it deqends, Mr. Chairman, on how you read
this compensation. You see. first of all, as I said, it is only a 2-year
contract and option. By the way, this is a proposal and I do not
know whether the union will take it or not. But even so, it says that
the contract with the rookie is for one year with a 1-year option. At
tlie end of 2 years he is a free agent.
Senator Ervix. I am talking about after the 1 year, when he has
served out his entire contractual obligation. Under this proposed
merger agreement he cannot transfer at all if his original club is
willing to meet the price from a competitor and if the competitor
exceeds the price that the original club can pay, they are subject to
an undefined penalty, monetary, or loss of player contracts, or trans-
fer of player assignments, or loss of choices or combination of the
three. And" I am sure you are familiar with Hamlet's soliloquy, whether
it is l)etter to endure" the ills we know of than flee those we know not,
and I think most of us will endure the ills we have rather than flee
to the ones we know not, and I think that is an eifective deterrent
against player switching.
Mr. Nathax. Mr. Chairman, I do not see how anybody can read
these terms, honestly, how anybody can read these conditions and
say this is undefined or unclear. If I were an arbitrator and the
employers and the teams and players said will you be the arbitrator,
third "man, and I said yes, and I read this and it said these two
things, the arbitrator sliall not consider the difference between the
level of contract payments to the player by the former club and the
level of contract payments to be paid him by the club with which he
signed, and also the arbitrator shall not award compensation so sub-
stantial as materially to discourage the movement of players from
one club to another, I would know what I was reading.
Senator Ervix. :\lr. Xathan, that says that but who is going to
define that ? Nobody but the arbitrator.
Mr. Xathax. That is correct.
Senator Ervix. Who answers to no man and whose action cannot
be reviewed in courts of law.
Mr. Nathax. That is correct.
Senator Ervix. So, it just says the sky is the limit. "Wliatever the
arbitrators say, that is the penalty you pay for daring to hire a
player away from another team even though he is supposed to be a
free agent whose contract obligations have been fulfilled.
Mr. Nathax. Well
Senator Ervix. They have a similar option clause in football and
here is what — this is an article from the Maine Law Review, saying.
Few, if any players have been successful in playing out their options and
moving to another club. The end result is that the option clause has the same
effect as the reserve clause because the player is still tied to the club with
which he first negotiated.
164
Mr. Natptan. But that football provision, as I understand it, Mr.
Chairman, has nothing' like this in it.
Senator Ervix. The football leagues would be covered by exactly
the same exemption from the antitrust laws as the basketball
leagues, plus the fact that they are subject to some kind of limita-
tion with respect to taxes that the basketball leagues would not be
subject to. so, what is sauce for the football goose is going to turn
out to be sauce for the basketball gander because they have exactly
the same power under this exemption from the antitrust laws.
]Mr. Nathan. Well, of course, I am a member of the bar, Mr.
Chairman, but I do not practice. As I see it, if I read this at all,
this provision, anything that the new merged league would do would
be subject to antitrust provisions.
Senator Ervix, But the difference now where when Congress
passes a law providing for the punishment of a person, it says
everybody be punished by a fine not to exceed so much or imprison-
ment will not exceed so many years, or both. This says he can be
punished by any kind of a monetary fine without limit except some
vague indefinite words that nobody could tell exactly what they
mean because they have no standards that the arbitrators might
decree. So, it seems to me — I cannot see the difference between the
reserA'e clause and this in effect.
INIr. Nathan^. I think there is a world of difference.
Senator Erat^x. I certainly agree with the very splendid testimony
you gave in the Curt Flood against the reserve clause.
Mv. Natiiax. Oh, I think it is terrible. I do not like the reserve
clause at all. But this is entirely different.
Senator Er-\t:x\ I think this accom])lishes the same objective as the
reserve clause, maybe not in quite as brutal a fashion. Instead of hit-
ting them with a club, sort of sticking a stilleto in them and twist-
ing it subsequently.
]\Ir. Nathan. Well, ]\Ir. Chairman, I have emphasized these two
conditions which I said if I were an arbitrator I could be very well
guided by and I think clear. But as I see the football provision
where they talk about compensation, they say the Commissioner may
aw^ard to the former club one or more players from the active
reserve or selection, future selection, choices of the acquiring club, as
the Commissioner in his sole discretion deems fair and equitable.
Any such decision by the Commissioner shall be final and conclusive
and, Mr. Chairman, will all due resj^ect, I think a provision for
arbitration with three people and one from the outside is as different
from this as night and day.
Senator Erm:x. Well, I have had some clients sort of ruined by
arbitration and they had no remedy in the courts. In other words, it
puts the arbitrator sort of on the same plane with the Lord God
Almighty, nobody above him, and nobody can reverse him. If you
do not like what the court does, you can appeal, but from the arbi-
trators, there is no appeal.
J\Ir. Nathan". That is correct.
Senator ER^^x. And you have got some loose words in this which
are about as good as the signpost that says if a man wants to get to
a certain destination he should travel north, south, east, and west.
Excuse me. I should not have interrupted.
165
Mr. Nathan. No, I have nothing more to say, sir.
Senator Ervin. In Kuhn versus Flood, you testified the marketplace
would then become a more important determinant. Given the facts
of today, there could be moves by selling of contracts or trading of
players. You stated at that trial :
It would be my judgment as an economist that the elimination of the re-
serve system and substitution of a contract or arrangement with the maximum
period of five years would certainly be advantageous in the distribution of
player talents among the teams.
Then you were asked the question, skipping over some for the
sake of brevity.
Would a player who is working under a five-year contract be likely to have
the same incentive to improve his skills and performance as a player who is in
a position to negotiate his contract again at the end of every season, and your
answer is this : "In my judgment he would have more incentive."
In my judgment, bottom of the page, last paragraph, he would have more in-
centive because when he is working with one company, with one team, and he
knows that unless that team sells him he is always going to be with that
team, I think how much more lie can make out of that team is limited by how
successful he is in negotiating with his manager, but if he knows two years
hence or three years hence or four years lience he is really a free agent and
he is going to be able to go out on that market and be an openly competitive
product or has an openly competitive service, in my judgment, the inducement
for his achieving outstanding fame and reputation would be even enhanced by
that.
Do you have a copy of this, page 438.
In other words, as I construe your testimony on this phase of that
case, you think that one of the things which encourages a player in
an athletic sport to develop his skills arises out of the fact that he is
free, at least after a limited period of time, to transfer to another
club which gives him a better offer.
INIr. Nathan. To negotiate with another club to get a better offer,
absolutely.
Senator Ervin. And it is a sort of an economic bondage to say to
a man he can only negotiate with one club or give one club prior
rights to his services, is it not?
]\Ir. Nathan. That is right. That is why I am very much against
the reserve clauses that exist in baseball.
Senator Ervin. And I take it that you would be against this pro-
vision here if you thought it would produce or tend to produce the
same result as the reserve clause produces.
Mr. Nathan. I certainly would, but I cannot conceive how it
would.
Senator ER^^N. Well, now, this limitation you have got under this
proposal here, if this merger takes effect has the rookie coming
in
Mr. Nathan. If it is negotiated with the players. I do not know
whether they will ever accept this proposal.
Senator Ervin. Well, if the ones now in the sport accept it, it
would become binding on the ones who have to enter later and have
no voice in the matter, woidd it not?
Mr. Nathan. Sometimes it is much easier to put the bee on one
employer than it is on two or, you know, one group. Sometimes.
166
Senator Ervix. Yes. That is the reason I object to the mergers. I
think when you have got two possible employers it is better than
one.
Mr, Natiiax. If all other things are equal.
Senator Ervin. Now, this merger proposal provides that the home
team is to retain all of the gate receipts of the home games, and do
you feel that the distribution of home game receipts among other
teams might be a good way to assist ailing basketball teams?
Mr. Natiiax. Yes, I personally do.
Senator Ervix. Would the distribution be more in keeping with
free enterprise than restriction on a player's right to bargain?
Mr. Natiiax^ Well, it depends on how that distribution is arrived
at. I would prefer a distribution between the home and visiting team
but that is a judgment. I suspect that when the merger will take
place and w^hen the voting is accessible to all, there will be reconsid-
eration of this division.
Senator Ervix. Now, you have a disparity in the financial
resources of teams in the league and usually that financial advantage
where the gate receipts are given to the home team accrues to the
teams that have the most successful clubs or are located in the centers
of population.
]\Ir. Nathax. That is the tendency. It is not persistent. We found
in baseball surprisingly, as I pointed out when I testified in the Mil-
waukee case for the State of Wisconsin and the city of INIilwaukee,
that JNIilwaukee is not a big city relative to New York, Boston, Phil-
adelphia, Chicago, and the interesting part of it is that Milwaukee
is near Chicago and has competition and yet, as I recall, in all but
one of the 13 years there, INlilwaukee outdrew, I think, three out of
four teams in the league. Really, with that city that was quite
remarkable.
You cannot be rigid on this. It varies with the teams, the stand-
ing, the enthusiasm of the people and a wide variety of things, but
by and large, INIr. Chairman, you are right, the larger city and the
best team will tend to ha^■e the larger gate.
Senator Ervix. And you lay stress upon the importance of shar-
ing on some kind of an equivalent proportion the gate receipts in all
the games betAveen tlie home team and the visiting team.
INIr. Nathax. Yes. I would favor that. I would hope they would
work out an arrangement that would be mutually beneficial.
Senator Ervix. And for that reason you disapprove of the provi-
sion in tliis proposed merger agreement under which the home team
would take all of the gate receipts.
Mr. Nathax. Well, I do not know how long that will last. I
really, INIr. Chairman, did not get into that but in principle, I would
say i would hope that over time there would be a distribution dif-
ferent from the
Senator Ervix. Of course, unless they offered it, it could endure
forever, could it not, as long as the basketball leagues endure?
Mr. Natiiax. Yes.
Senator Ervix. Before going into another matter, I do not know
whether you have a copy of Senator Kuchel's testimony or not.
Mr. Nathax. Yes; I do, sir.
167
Senator Ervin. "Well, I invite your attention to page 10.
Mr. Nathan. Yes, sir.
Senator Ervin. It says:
Fourth, before a free agent whose contract has expired signs with another
club, the former club could retain his services by meeting the highest offer
made to him.
How long do you construe that to apply after a man has fulfilled
his contractual obligations?
Mr. Nathan. That would be on a continuing basis. If somebody
offered him— if he is getting $50,000, somebody offered him $100,000
for 2 years and his club says all right, we will pay you the $100,000
and then he gets an offer for $200,000 and they say we will pay you
the $200,000, then he stays.
Senator Ervin. That is my construction of it. Notwithstanding he
is like a player in the Radovich case, who wanted to move from the
east coast to the west coast because of the illness of his father and
the club refused to let him do it, no matter how much this man
wanted to move, he would be bound by that to remain with the orig-
inal club as long as they were willing to meet the offer.
Mr. Nathan. That is correct.
Senator Ervin. So, under that clause the club with which he had
originally contracted could retain his services throughout his playing
life.
Mr. Nathan. That is correct. If they were willing to meet any
alternative payments from any other club, he would be there for the
duration.
Senator Ervin. And then if the other club raised it to a point
that the original club was unwilling to meet, he could transfer, but
providing the other club would be willing to risk this unknown pun-
ishment at the hands of the arbitrators.
INIr. Nathan. That is correct.
Senator Ervin. And do you not think that that is a very strong
deterrent for the other club to be unwilling to raise the price beyond
what his original club was willing to go ?
]Mr. Nathan. Well, ]Mr. Chairman, I guess onp has to take these
words literally and I just kept— as I read that proposal, and I am
not recommending that the players union accept it, but as I read
that proposal, and I thought if I were the third man on this arbitra-
tion provision, I do not see how I could award a very substantial
sum in the face of the words that, "The arbitrator shall not award
compensation so substantial as materially to discourage the move-
ment of players from one club to another."
In my judgment, anybody who awarded a large amount in the
face of those words would be engaging in abuse of a trust.
Senator Ervin. Well, there is not any real defined rule by which
we can measure what that word materially means.
INIr. Nathan. Well
Senator Ervin. And so the arbitrators, set free for sail on the
sea without a compass to guide them when the shores are very indis-
tinct.
Mr. Nathan. Well, this is not a bad compass. I would like to have-
in arbitration in the past— if I had indications of this nature I think
I would be pretty well guided.
168
Senator Ervix. Do you not believe the fair thing to the players
would be to sa}' when a player has served out his allotted contract
that he ought to be a free agent, a real free agent, not one of these
fictitious free agents that this merger agreement speaks of?
]Mr. Nathan. Well, they may negotiate it and, you know, the
employees association may very well get a modification of this provi-
sion.
Senator Ervix. Well, they might but they might not.
]Mr Nathax. ]Might; might not. They might go on strike. I would
not recommend it. I mean, I am not recommending it in view of the
situation.
Senator Ervix. But do you not think a man ought not to be kept
in economic bondage?
]Mr. Natitax. I am very much against that.
Senator Ervix. And would it not be preferable for Congress to
write into this bill if it passes, a provision that after a man fulfills
all of his contractual obligations, that he is a free man, not a ficti-
tious free agent but a free man with the power to negotiate the sale
of his skills to the highest bidder?
jNIr. Natmax. Well, I have been in Government and out of Gov-
ernment in Washington for almost 40 years, I guess, and I am very
much against those who say everytliing the Government does is
wrong and everything that it touches it should not touch and what-
ever it does touch it ruins. But, on the other hand, ]\lr. Chairman
and members of the committee, there are provisions like our copy-
right law on music reproduction, which was passed in 1909 and says
there should be a 2-cent service charge on records, a 2-cent royalty.
That darn tiling is still on our books after 62 years and we do not
seem to bo able to get it off, so I am not sure that it is always good
to legislate. I do not mean principles, INIr. Chairman, but I worry
somewhat about legislating detailed regulation. It does not always
work out so well.
Senator Era^x. Well, I believe the antitrust laws have been on
there a little longer than that and I am still in favor of abiding by
the antitrust laws.
INIr. Nathax. I am, too, but I wish they were more effective in
many ways.
Senator Ervix. And I also recognize the validity of what you say,
that there are a lot of restrictions on the free enterprise system and
what bothers me is a man who believes essentially the most precious
fact of life is freedom. Every time a politically potent group comes
to Washington they can get freedoms of other people whittled away
for their particular benefit.
Senator Hruska. Would the chairman yield at that point?
Senator Er\t:n. Yes.
Senator PIruska. With reference to his suggestion that a player
should be free when he serves out his time, the suggestion is made,
]Mr. Nathan, that a player should be free when he serves his contract
term as opposed to the i)roposition that if another club makes an
offer, the hometown team can match that offer and keep him.
What impact would that kind of a provision have upon the will-
ingness of a club to hire a player for a given term at a given
169
salcary? Would not tlmt limitation affect the willingness of a club
owner to mako terms and conditions in the employment contract?
]Mr. Nathax. I would think, Senator PIruska, that this would tend
to result in two activities or two directions. One is the employers
would want a longer contract. They probably would not want to
hire anybody for two years. Thc^' would want five.
Senator Hijt'ska. And that interferes with the man's free enter-
prise and fr-eedom as an agent, does it not? He has to stay there 10
years instead of 8. He is selling his freedom.
Mr. Nathan. I have an idea they may say a limit of 5 years but I
do not know. You see, in economics, as we well know, and taxation
and every ting else, every time you move in one direction it is amaz-
ing how"^ people squeeze out in another direction, so it is awfully
tough to judge the economic consequences, but there is no doubt that
they would want a longer term and might be willing to pay less
money.
Senator Hruska. So, there again, his capabilities
!Mr. Natiiax. Are counter-balanced.
Senator PIruska (continuing). As a free agent are somewhat lim-
ited and impaired. If you take benefits you have to take detriments
and if you accept detriments you want some benefits to pay for those
detriments. It is going to come out of one end of the horn or the
other.
]Mr. Nathax. Yes; what we call cost-benefit analysis. Usually
there is a cost for every benefit.
Senator Er\-ix. One"^ thing is fairly certain. No one is going to
contract for anybody's athletic skills over a period of 10 years or
such a period as that because those skills usually evaporate in less
time than that.
Mr. Nathax. It is surprising in the new contracts how many 5-
year contracts there are and how many years
Senator Ervix. I was talking about 10 years and not 5.
Mr. Natiiax. Yes.
Senator ER^•IX. Now, this theory that if you have independent
leagues and independent players that it will cause all the good talent
to gravitate to the big cities is not necessarily so. It is sort of like a
man talking about the Bible, do not bother the whale or vice-versa.
That is not necessarily so, is that not right?
j\Ir. Nathax. That is correct.
Senator Ervix. In other words, there are two ways for a team to
lose an audience, are there not ? One of them is to be such a sorry team
that it never wins any games and to be such a good team that its op-
ponents never win a game.
INIr. Nathax. Yes.
Senator Ervix. You testified in the Flood case, and I quote at
page 399,
We do know that in economics there are marginal responses and by mar-
ginal responses I mean that if. for instance, a top team were to have three
outstanding players, the addition of a fourtli player may l)e less advantageous
to that team than the addition of a tliird player, and the addition of a third
outstanding player would tend to be less advantageous relatively than the ad-
dition of the second player, and that the fourth player being on the team
which has three outstanding players, that additional one player to a club that
does not have an outstanding person may have more value than to the four m
170
that it probably does have three outstanding players, so that these marginal
factors become very important.
Mr. Nathax, Yes, sir.
Senator ER\^N. And that will tend to prevent the fear that one or
two teams will get all of the top talent, would it not?
]\Ir. Nathan. Yes. It is a factor that certainly mitigates against
the tendency for all the good players to go only to one team. There
are countervailing factors, true, but the big cities and the richer ones
do tend, but there are all kinds of offsetting factors.
Senator Ervin. I agree with you all of us like to make profits in
anything we go into, but what surprises me is the high prices which
some people will j^ay for a franchise in a league where we have one
of the sports involved with the recognition of the fact that they may
lose money on the thing.
Now, these people — it takes pretty wealthy people to purchase
franchises in these clubs, does it not?
INIr. Nathax. It sure does.
Senator Ervin. And people have verious ways of amusing them-
selves. Some people make their money in town and try to farm out
in the country and they become what we call agriculturists, the man
who makes his money in town and loses it in the country, and a lot
of people like to have their hand in some sport.
]Mr. Nathan. Yes.
Senator Ervin. And the income tax laws do allow them to deduct
from their regular income the losses which they sustain in their
enterprises that are connected with sports.
]Mr. Nathan. I would make two observations. I made one before,
]Mr. Chairman, that I think you may run out of these people, but
secondly, I think it is not a very sound economic basis for any
industry.
Senator Ervin. "Well, it will not be such a disastrous thing as we
ordinarily fear it to be as long as Federal income taxes remain as
high as they are now.
Mr. Nathan. Well, most businessmen and financial people I know
do not like to lose money.
Senator Er\t:n. I know that. And the more they have got, the
more they want to make.
Mr. Nathan. That is correct.
Senator Erxin. That is necessary and it is understandable. I am a
free enterprise man myself. I do not believe in putting limitations or
very many limitations on people. But the queer thing about this
proposition as I remarked this morning, is here are some men who
are unwilling to restrain themselves in their competition for new
players, so they ask Congress to pass a law so as to restrain some-
body else, namely, the players.
Do you have any record in your study of this proposition, as to
sales of franchises in these basketball leagues during recent years ?
Mr. Nathan. Unfortunately, I do not, sir.
Senator Er\t[n. I drew the deduction from your statement I think
to the effect that while the cost of the players is advancing, that the
cost of the franchises has even outdistanced the cost of the players
percentagewise.
Mr. NathxVN. I do know that, sir.
171
Senator Erm:x. So, a person who sustains a loss by reason of his
interest in investment in an athletic team can very much minimize
his overall loss by deducting that loss from his profits in his other
activities, can he not?
INIr, ISTathax. Yes; he can, but, of course, it is not without a cost
to him. If you make a million dollars here and you lose a million
somewhere else, you have not got that million in the first place. You
lose it in the second place.
Senator ER\^x. A man has got a very substantial income up in the
neighborhood of a million dollars, if he loses $150,000 in the athletic
team he takes it off his other earnings. In the long run he is in
prettj' good shape, is he not?
Mr. Nathax. I would rather lose $150,000 out of a million than to
lose it out of $150,000.
Senator Ervix. Xot only that. ^^Hien he purchases a franchise he
can amortize a large part of the purchase price of the franchise over
a period of a few j^ears and thereby recover a large part of his capi-
tal investment, can he not?
Mr. Nathax. Well. Mr. Chairman. I, do not know of any invest-
ment in our society where we do not provide people an opportunity
to recover their investment. I think that is eminently fair and
proper.
Senator Ervix. I agree. I think it is one of the main stays of the
free enterprise system just like freedom of contracts.
Mr. Nathax. If I buy a building that is worth a million dollars
and it is likely to last 20 years. I shuld be able to amortize that
$50,000 a year tax free, and I think that is exactly what that provi-
sion is.
Senator ER^^x. It takes a man about 50 years to recover his
investment in a building but he can recover his investment in player
contracts in about 5 years.
Mr. Nathax. But that is assuming, Mr. Chairman, that he has
enough profits so that this depreciation leaves him even in the black
but these records show that he does not have that.
Senator Ervix. Yes. if he pays out a good deal of money for pur-
chase of a franchise, he can regain a lot of his capital by deprecia-
tion, and while theoretically he is sustaining a loss, actually he is
not sustaining a loss very long if he does it over a period of 5 years.
Mr. Nathax. It depends on how big his profits are. Even in the
oil industry, Mr. Chairman, it is not very attractive if you do not
hit oil. You can write it off and all those intangibles are nice but if
you do not hit oil it is not very profitable. You do not lose as
much
Senator Ervix. No doubt about that, but I am just talking about
some of these theoretical loses that are sustained. You recapture
them very shortly. I take depreciation on mj' law books and take
depreciation on very small amounts of business property I own but
it takes me a longer time than 5 years to recapture my capital
investment. They can also deduct salaries of players from ordinary
expenses.
Mr. Nathax. Well, as you said yourself, Mr. Chairman, these
players sort of run down, not over 40 or 30 years. You have got to
write them down fast.
172
Senator Ervix. I nm not objecting to that. I think it is perfectly
fair. As I say, it is an inseparable part of the foundation of the free
enterprise system in which I believe, and in view of the fact that
nobody is compelling anybody to make an investment in an athletic
club — he does so voluntarily and not under compulsion — I just do
not believe we ou^ht to take and destroy the law of competition and
authorize such things as a common draft, denying the man a right
to contract for the sale of his services to the highest bidder, merely
to keep people from suffering some economic loss in a field in which
they have voluntarily invested, and especially when they are people
who have a lot of other investments and are not in any danger of
having to apply for a place on the welfare rolls.
I think it is asking, in my own opinion, too high a price to sacri-
fice somebody else's freedom for their economic benefit.
Thank you very much.
Senator Tunney ?
Senator Tunney. Thank you, ]Mr. Chairman. I have just a couple
of questions which I would like to ask. Because of the late hour, Mr.
Chairman, I am wondering if I could submit other questions to the
witness in writing.
Senator Er\t:n. Yes.
Senator Tunney. Thank you. I just was wondering, Mr. Nathan,
how many teams do you think in the XBxA- or the ABA, according
to your analysis, are in serious enough financial trouble to go into
bankruptcy in the near term future ?
Mr. Nathan. It is hard to tell, Senator Tunney, because mortality
sometimes is awfully stubborn in economics and people can fall with
a little push and some with some enterprises stay on and lose and
lose and more is pumped in.
But just looking at the record over the years, Senator, I would be
surprised if ten teams did not disappear in the next 3 or 4 years, 2
to 4 years, if there were no merger.
Senator Tunney. Did your analysis have the data which would
indicate the total income that a basketball team gets in the way of
revenue? For instance, gate receipts, television, radio concessions,
endorsements, basketball camps, et cetera? It has the total income
that was available to the team and I would assume not the total
income available to the other but the total income available to the
team.
Mr. Nathan. Well
Senator Tunney. When you nodded your head it is in the affirm-
ative, did you not, for the record ?
jNIr. Nathan. We have the total incomes.
Senator Tunney. Total incomes of the concessions ?
Mr. Nathan. Every bit of income is in gross revenues, yes, sir.
Senator Tunney. But you did not have the income to the owners.
Mr. Nathan. The net to the owners
Senator Tunney. The net income from all other sources.
Mr. Nathan. That is correct. No, sir.
Senator Tunney. Right.
Mr. Nathan. No, sir.
Senator Tunney. Noav, unless I am mistaken, as I am understand
your testimony, and as I understand the colloquy which you had
173
with the Chairman, if we were to proceed the waj^ that we are going
now in basketball, that within a very short period of time, if we
have not already arrived at that time the only people who could own
a significant number of basketball teams would be the very rich, the
very rich, who would have income from other sources which would
offset the losses that they are sustaining from the maintenance of
their basketball team. For instance, like the owners of race horses
for the most part are very rich individuals who use the race horses
as a write-off of other income for the joy of the sport.
Mr. Xathax. I think that is a correct observation. I think in view
of the financial records that prevail, increasingly this will be exclu-
sively a rich man's activity. Increasingly.
Senator Tuxxey. AVell, I would like to ask my other questions,
Mr. Chairn:fan, in writing because of the lateness of the hour.
Senator Hart. I Avant to thank our witness for helping those of us
who are not economists but have a point of view about this get a
handle on what are the reasons we think team sports may be entitled
to a separate special kind of treatment under the antitrust laws.
In effect, what you are saying is that there is much too much of
business in them to be regarded as purely sports, but there is so
much sport in. them that they cannot be treated as we treat tradi-
tional business.
Mr. Xathax. And so many elements of organization in them. The
very nature of the league has organizational elements that are dif-
ferent from ordinary business.
Senator Hart. I think that is very helpful. Thank you.
Senator Hruska. Mr, Nathan, your testimony has been very inter-
esting. It has a sweep to it and involves so many of the fundamental
things we have been talking about that I look forward to studying
it even more intensely than I have up to now.
I was especially interested in the testimony in your statement
about the record of instability of the leagues. So that we have the
formation of the Basketball Association of America in 1947, I
believe.
Mr. Nathax. Yes, sir.
Senstor Hruska, 1946, the BAA begain to play, 1947-48 season
of the BAA was completed but it was a financial disaster for the
league and for many on the team. Then at the start of the 1948-49
season, four of the stronger national league teams joined the BAA
to make it a 12 club league and that wound up in a pretty disastrous
fashion in very short order,
Mr, Xathax. Right,
Senator Hruska, Xow, then, you go on to say the later stage of
XBA growth coincided with the establishment of the ABA in
1967-68, The ABA had 11 teams at the start and the same number
in 1970-71, Xo ABA franchises have been terminated but they have
been moved around a great deal. Only four of the 11 teams now
operating remain in the city where they started.
It would seem that during the history, since 1945, of these leagues
we find either one of two things, either bankruptcy and total
destruction or moving those checkers around hoping that the new
location, the new pasture, will be greener than the old one.
78-465 O— 72— pt. 1 12
174
I would like to ask two questions. How lono; can this happen and
have the sport survive as something that will be attractive to the
American sports fan. And, secondly, what impact has this upon the
future of the players themselves? What is there in this that is good
for the players on more than a one or 2 or 3-year contract ?
Mr. Nathax. Well, Senator, as I look at the history here, and we
could spend a lot more time in greater detail, my reading of the
sweep of history of organized basketball is that when there are two
or more leauges, they do not last because the rate of mortality is
very high. Then you go back down to a lower level which is stable
for a period of time, where you have less players and less activity,
and then you start up again. AMien you get two or more leagues, it
begins to get very unstable with high losses, and the number of
teams will go down again. That is my judgment.
I think that this instability is adverse to the players because it
means less opportunities to play and I think it is adverse to the
public because I agree with the Chairman that there is a great
demand and a great interest in basketball and I think it is unfortu-
nate that we cannot somehow organize this and have arrangements
whereby it would be an expanding industry.
I would like to see it in 56 cities, not 28, but I think we have to
understand how we get there and I do not believe we get there by
multiple leagues, frankly.
Senator Hruska. Fiver years ago we enacted a bill for the foot-
ball league. Would you like to comment on its experience in the last
five seasons ?
Mr. Nathan. Well, they have done very well. I would like to see
more expansion. There has been some but I would like to see more.
And certainly, there has been less movement in that period than
there had been theretofore.
I have not made a study over time. I think that there are studies
now l)eing made and I hope this Brookings study will go into great
detail of finding out when the franchise moves and the failures
occurred and correlate that with the kinds of relationships and
arrangements that exist.
But I think the more open the competition, the greater the in-
stability. I think this is unfortunate but I think in a league activity
that is inevitable.
In business you have failures. People come in and replace the fail-
ures. But in league activities, you are dealing with a different phe-
nomenon.
Senator Hruska. Perhaps the status of the football leagues
leaves something to be desired, but what would it be as compared
with the present status of the basketball league ?
Mr. Nathax. ]\Iuch more stable. INIuch more solid.
Senator Hruska. ]\Iore advantageous for the interested parties, all
told?
Mr. Nathan. I think so. I think the football players have done
pretty well in their negotiations with the football league.
Senator Hruska. And the fans have done pretty well.
Mr. Nathan. Yes, except those that cannot get tickets.
Senator Hruska. Perhaps. Well, thank you very much for your
appearance here.
175
That is all I have. INIr. Chairman.
Senator Ervin. Now, the figures you have received and analyzed
were figures relating to the operation of the teams? In other words,
if the concession or concessions in the stadium where the game is
plaved. in the building where the game is played, were assigned to a
corporation under a separate name, you did not get the figures for
that ?
Mr. Nathan. No, sir.
Senator Ervix. And that is true even though the owners of the
team may have been the principal stockliolders in the company
enjoying the concession?
Mr. Nathax. Yes, sir.
Senator Ervix. And the same thing in cases where the owners of
the team own the place where the games were played and the rentals
were paid to a separate corporation. You did not get the figures.
Mr. Nathax. We would not get those losses. I do not know
whether the stadium or arena — we did not get that.
Senator P>.vix. If the owners of the teams had such concessions
and owned the places where the games were played, they may as far
as you know, have made a profit off those instead of sustaining a
loss.
Mr. Nathax. They may have.
Senator Ervtx. Now, do you not think that the movement of clubs
is due to the fact that a man could go in if he had the money— he
could purchase a franchise? He can take a large part of his pur-
chase price and have it treated for tax purposes as capital outlay
and can recover a substantial part of his original capital outlay by
amortizing over a period of about 5 years and then if he could find
a purchaser, he can sell the francise and if he sells it for substanti-
cally what it cost him originally, he has regained his capital, has he
not?
Mr. Nathax. Well, he certainly would have a capital gain, but,
jNIr. Chairman, from an accounting point of view you have got to
look at your current losses. You see, I find it rather repelling from
an economic point of view to look at losses as something acceptable
or almost desirable because you can offset them against profits. To
me I cannot but that as something acceptable. I think that the Gov-
ernment in its tax policy may be correct in saying, well, let us
induce people to invest in other things by saying if you lose in this
and gain in this, we let you offset. We will take 50 percent of the
loss.
Senator Ervix. It is not very much of a loss involved if one can
recover a very considerable proportion of his capital gain over a 5-
year period.
Mr. Nathax. It depends on how big the loss is, sir.
Senator ER\^x. I am talking about the recovery.
Mr. Nathax. The recovery itself is a good capital gain but it
depends on how much of a loss you had over the year.
Senator Ervix. In other words, do you have any figures showing
how much — do the tax returns show how much, what percentage of
the original outlay for franchising in a basketball league is over a
5-period ?
176
Mr. Nathax. Yon can get that ont of the balance sheets but I
have not studied it. It can be gotten out of the bahance sheets.
Senator Ervin. Then a man, if he breaks even for a 5-year period
can take history by depreciation, and then sell for what he origin-
ally purchased and take the capital gains tax. He is a pretty fair fix,
is he not ?
Mr. Nathax. I have not seen any teams in the ABA break even;
no, even over the whole period.
Senator Ervix. I know. Well, he could take a pretty good loss.
Mr. Nathax. That could be
Senator Ervix. If his franchise appreciates in value after he
recovers a substantial portion of his original investment through
depreciation and his franchise appreciates in value where he sells a
$2 million_ franchise for $7 million, he comes out pretty good on the
capital gains tax, does he not ?
Mr. Nathax. He fairs fairly well in breaking even on his P&L
statement.
Senator Ervix. Yes. Since we are not allowed to see what both the
right hand and the left hand doeth, these losses that appear on oper-
ating expenses may be very much minimized. And that is one reason
I thought maybe we ought to have some financial reports from these
parties.
jVIr. O'Leary. Mr. Nathan, I would like to get your reaction, if I
could, with respect to one other area. As an economist I am sure you
are familiar with the term "barriers to entry." Taking the example
of Washington, D.C., wliere there is no longer a basketball team, let
us assume for the moment that some business man is willing to take
the financial risks attempting to make a go of it in Washington
with a basketball team.
Do you feel comfortable, as an economist, with the proposition
that this individual would have to go to the other owners in order to
gain entry into the league ?
Mr. Nathax. Yes ; I do. I do not see how you can have any other
arrangement. If you have people in a voluntary business organiza-
tion and they have to take anybody who comes along, maybe they
settle, for a financial arrangement but somebody comes along from
Middletown, Ohio, and happens to a rich man with Armco Steel
and he wants ]Middletown on the face of the globe with a big
basketball team and he says to NBA or ABA, I want to join. What
are your terms? And here they are.
I think if that were the cause I think you are asking the others to
jeopardize their own position without anv consideration.
Now, what you might do, the others might set their criteria and
considerations in terms of capital, in terms of a minimum commit-
ment of revenues or attendance or things of that nature, but I do
not find it repugnant to find him going in. It is a voluntary
arrangement and in our society I do not think you can impose abso-
lute requirements on a group who have gotten together and put their
money up and trying to arrange to survi\'e and make some money.
I think that there ought to be opportunities for people to get in,
and I would like to see it. As I said, I would like to see us have 56
instead of 28 basketball teams. I think you have to do it in a way, in
going from 28 to 56 you do not go back to eight.
177
jNIr. O'Leary. I take it, you would also be comfortable in saying
that nearby owners, say 13altimore, would have a veto over a poten-
tial new one.
Mr. Nathan. Xo ; I do not think I would have the owner have the
veto. I think the league ought to have the veto. I think the owner
ought to have the right to go in and yell and scream and shout and
get the votes or not get the votes but I would say that the voluntary
organization in total would consider every opportunity independ-
ently and openly.
Mr. O'Leary. Thank you.
Senator Ervix. Thank you, Mr. Nathan.
It is apparent we cannot finish. We probably did not figure on a
person cross-examining the witness as long as I did when setting the
schedule of the witnesses. Nobody could anticipate that. We have Mr.
Cherry of the Kentucky Colonels, Mr, Abe Pollin of the Baltimore
Bullets, and Commissioner Kennedy and Commissioner Dolph. It is
apparent we cannot reach them today. And we have six witnesses
scheduled for tomorrow that probably will take — that will gum up the
works considerably if we add these witnesses to the schedule.
I wonder how many of you gentlemen could come back at a
subsequent time ?
Mr. KucHEL. Mr. Chairman, may I ask, is it possible for the com-
mittee to continue this evening for an hour and possibly hear two of
the remaining four ?
Senator Ervin. Well, I can as far as I am concerned, although,
like everybody else, I have got some things to do But
Mr. KucHEL. Could we caucus for a moment ? There may be logis-
tical problem, Mr, Chairman,
Senator Ervin, I understand that. Come back in November, We
will have some hearings then.
Senator, we could reschedule them in November, if that is accepta-
ble or some mutually covenient time later,
Mr, KucHEL, Mr, Chairman, it is not your plan to continue this
evening ?
Senator Ervix. Well, I say I am willing to stay here,
Mr, KucHEL. Could the four testify tomorrow after your current
schedule of witnesses ?
Senator Ervix, Well, if I can get somebody to hold it. I have got
to go to New York tomorrow afternoon. If I can get some other
Senator to hold a hearing, I will be glad to have that done. I can be
here in the morning but I cannot be here in the afternoon.
]\Ir, KucHEL, Would it be possible for another Senator to con-
tinue, Mr, Chairman, so that they could testify ?
Senator Ervin. Well, I cannot answer that. I can only answer
about my own schedule. I find sometimes when you are chairing a
hearing it is awfully hard — we have got so many obligations that it is
sort of hard sometimes to get somebody.
Mr. KucHEL, I see the distinguished Senator from JNIichigan, I
wonder if it would be possible to continue on tomorrow and at the
178
conclusion of the scheduled witnesses, have another member of the
committee
Senator Ervin, Frankly, Senator, I would like to question those
people myself.
Mr. KucHEL. Then tomorrow is out. "V^^liat about Thursday. We
are starting a little later Thursday.
Mr. Chairman, is there any possibility that our four could start
tomorrow morning early ?
Senator Ervix. Unfortunately, I have an appointment starting in
the office at 8 :30 in the morning. You know how this is.
Mr. KucHEL. Yes, sir.
Senator Er\t:x. We could possibly have it Thursday afternoon.
We are going to start the hearing at 11 o'clock Thursday and there
are just two witnesses scheduled for Thursday and we could have all
of them, I think, then if that would suit them better than some
other time.
INIr. KucHEL. Mr. Chairman, there may be a conflict as far as our
four are concerned for Thursday. Could I — the alternative would be
that you would give us time in the next hearings at a convenient
time.
Senator Ervin. Yes. Frankly, I have got hearings of another sub-
committee scheduled next week and will not be able to next week
personally
Mr. KucHEL. Has the second series of hearings been scheduled,
Mr. Chairman?
Senator Ervix. Yes. I am informed that they have been. Novem-
ber 9th, 10th and 11th.
]Mr. KucHEL. May we caucus again, Mr. Chairman ?
Senator Ervin. Yes.
Mr. KucHEL. Mr. Chairman, would it be possible for you to con-
firm November 9th for us now ? There is a conference
Senator Ervtlx'. Yes. Counsel informs me that it would be possible
to schedule you for November 9th.
Mr. KucHEL. For the four remaining witnesses. Thank you very
much, Mr. Chairman.
Senator Ervex'. I am sorry this situation arose but it is sort of
unavoidable when you get too many witnesses scheduled or get a
long-winded cross-examiner, either one.
Mr. KucHEL. Could it be understood, then, that we will appear,
our four remaining Avitnesses will appear in the morning of the 9th
of November?
Senator Era^x. Yes.
jNIr. KucHEL. Thank you.
Senator Ervix. In any order that counsel — as between those four,
they will be the first four witnesses. You communicate to the coun-
sel.
Mr. KucHEL. Thank you, sir.
Senator Ervix\ Thank you.
(Mr. Nathan's statement follows:)
179
statement by Robert R. Nathan
President, Robert R. Nathan Associates, Inc.,
before the Subcommittee on Anti -Trust and
Monopoly Legislation of the Senate Judiciary
Committee in Support of S.2373, the Basket-
ball Merger Bill
September 21, 1971
My name is Robert R. Nathan and my office address
is 1200 Eighteenth Street, N.W. , Washington, D.C. I am
an economist and the president of Robert R. Nathan Asso-
ciates, Inc., a firm of consulting economists. I appear in
support of S.2373. We have been retained by the Merger Com-
mittees of the National Basketball Association and the Ameri-
can Basketball Association to study and to report on economic
factors affecting professional basketball, the financial con-
dition of the teams, and the economic effects of the proposed
merger .
I have been engaged in economic research and analysis
and in the formulation of economic policies in the service
of the United States Government and in private practice for
40 years.
We have conducted economic studies for a variety of
American corporations, trade unions and nonprofit organiza-
tions; for Government agencies, including the Department of
Justice, the Defense Department, the Department of Commerce,
180
the Department of the Interior, the Department of Agricul-
ture, the Department of Labor, the Agency for International
Development, the Economic Development Administration, the
Office of Economic Opportunity, and the Bureau of the Budget;
for states and cities of the United States, including Con-
necticut, New Jersey, New York, Pennsylvania and Wisconsin;
and for the District of Columbia, the cities of Philadelphia
and New York, and the Port of New York Authority.
We also conducted a study of the Milwaukee market for
major league baseball for the state of Wisconsin in 19 66,
and an analysis of the impact of the Green Bay Packers on
Green Bay and Milwaukee for the Green Bay Packer Corporation
in 1968. Last year, I testified before the United States
District Court, Southern District of New York, for the
plaintiff, in the case of Curtis C. Flood vs. Bowie K. Kuhn ,
on the question of the baseball reserve clause.
I have appeared as an expert in many administrative
proceedings before the Federal Power Commission, the Federal
Communications Commission, the Interstate Commerce Commis-
sion, the Civil Aeronautics Board, the Maritime Administra-
tion, the United States Court of Claims, the Indian Claims
Commission, and the Federal Trade Commission, often involv-
ing issues of competition and regulation.
181
Introduction
Athletic teams and contests have played an important
role in national life throughout history. Ruins of great
stadiums and reports of ancient games attest to this. From
the start, athletic contests were important both to those
who participated and to spectators. There has been some
tendency in recent years to cite the growth of spectator
sports and the decline of participatory sports in the United
States and other countries as an adverse development. This
is not new, and it certainly is not limited to the United
States. There have always been sporting events for specta-
tors. Chariot races in ancient times, cricket in England,
soccer in many European and Latin American countries , and
modern rugby football in Australia and New Zealand are all
cases in point. Furthermore, spectator participation and
active participation in sports need not be in conflict, and
may actually stimulate each other.
The development of organized professional sports,
structured in leagues with authorized or franchised teams,
has added another dimension within the past century. With
the development of professional baseball in the 19th century,
professional football some 50 years ago, and professional
hockey and basketball more recently, athletic organizations
took on the nature and characteristics of a business, with
full recognition of such economic factors as marketing,
design and quality of services, revenues and costs, continu-
ity of inputs and outputs, incentives, investment, and the
like.
Professional sports enterprises as we have come to
know them are more than voluntary assemblies of men and
women for the purpose of performing athletic feats before
182
the public. They are businesses, with all of the basic ele-
ments associated with enterprises in market economies.
Today, the leagues and teams which operate profession-
al basketball are, in fact, offering recreation and enter-
tainment services in competition with other professional
sports, amateur sports such as college teams, and a great
many other forms of entertainment and recreation such as
movies, television, theater, and musical performances.
When we take note of the economic aspects of profes-
sional sports activities, we recognize the essentiality of
providing an environment conducive to a substantial
degree of financial stability in this area. If the teams
are to continue in business, to be competitive with each
other, and at the same time to be relatively stable geo-
graphically, there must be reasonable prospects for success-
ful business operations.
It appears that persons and groups who are attracted
to sponsorship and financial support of professional sports
organizations often look to personal satisfaction, the de-
velopment of community pride, and other factors in addition
to the possibility of financial rewards for their efforts.
In this country, and probably in other countries, we know
that many persons and groups have invested money and time
in the development of professional athletic teams to repre-
sent a city or area, with little assurance of any financial
return and considerable risk of large financial losses.
Some of the willingness to assume such risks may
derive from the fact that our tax structure provides for the
possibility of writing off losses incurred in one business
against gains that have been made in others. This method
183
of supporting athletic teams at less than full cost to the
individual or group owners has sometimes been used, especial-
ly when the early development of the professional sport it-
self or the development and the location of the team made
losses likely or inevitable for some time.
Whatever special circumstances may affect entrepre-
neurial decisions, it is important to recognize that the
basic business and economic forces which influence and shape
decisions in the purely industrial and commercial world will
also predominate in professional sports in the longer run.
The Supply and Demand for Professional
Basketball
A great many factors enter into the development of
a successful professional sports league, and of the teams
which comprise the league. An interest on the part of the
public must exist or be in prospect if the operation is to
begin at all. A pool of players, largely from amateur
sources such as colleges and universities, is essential.
Persons or groups must often be willing to risk large and
immediate financial losses against the possibility of future
operating or capital gains, plus the value of enhanced com-
munity prestige, if such enterprises are to take root. These
factors are different mainly in kind from the provision of
other goods and services .
The public must be made aware of the pleasure or
satisfaction they can get out of watching skilled players
compete against each other in the sport. Community pride
as well as active interest must be fostered. Arenas or
stadiiims must be provided. Auxiliary services, such as
parking and food and drink concessions, must be organized.
184
Beyond these routine business questions, it is abso-
lutely essential that the teams which compete against each
other in a league be matched closely enough so that the out-
come of single contests and the outcome of contests for
league championships continue to be in doubt. People will
not pay to see a consistent loser, either at home or away,
as has been dramatically demonstrated in many sports.
Balanced competition among the teams in a league is
the single most important factor in the economic success of
professional sports teams. This requires relatively equit-
able access to the pool of playing and coaching talent that
is available to the sport, and to markets that can support
the financial load of a professional team. It requires also
the assurance of relative stability and continuity. Since
the number of people available in the market area of some
cities is so much smaller than for other cities, this may
require some pooling of market areas . The principal example
of this is the arrangements some professional sports leagues
have made for pooling some or all of the proceeds from tele-
vision, from playoff series, and from the sale of new fran-
chises within the league.
Funds from diverse sources can thus help to give
cities with fewer people in the regional market area a de-
gree of access to the larger market, and thus a better op-
portunity to compete for the available playing and coaching
talent, despite the limited population of the immediate area,
The Green Bay Packers of the National Football League are
the classic example of a successful team in a small market
area .
185
The Nature of Competition
The nature and degree of competition among leagues
and teams varies over the life cycle of a professional sports
league as circumstances change, just as is the case in other
industries. Changes in investment needs of the sport, changes
in alternative investment opportunities, and the development
of new and unexpected competitors may all affect competition
over time.
The pattern of competition needed for economic health
will also vary with the nature of the industry. This has
long been apparent in the utilities, in airlines, and in
professional athletics. Benefits derived from greater di-
rect competition in one situation are often offset by the
additional costs arising out of a degree or a kind of com-
petition inappropriate to the industry at a particular stage
of its development.
In a diverse economy in which industries are at dif-
ferent stages of development, competition must be judged by
its results and not on dogmatic beliefs. The degree and
nature of competition must be conducive to investment, to
survival and economic health, to opportunities for actual
financial success in a broad spectrum of ventures in the in-
dustry, and to the potential success of others which may
just be beginning or are just coming out of the growing
pains often associated with new products or services.
The stability of professional sports enterprises
depends not only upon balanced competition, but also upon the
solution of the problem of proliferation of teams and leagues
to the point where the market for any one team is so diluted
that the very existence of teams is jeopardized. This relates
186
to the nuit±)er of teams which operate, to the number of leagues
which compete with each other, and particularly to the methods
of player procurement. Professional football and baseball
have arrived as their own solutions to these questions, in-
cluding the merger of the two football leagues with the aid
of legislation a few years ago.
I consider it absolutely essential, on economic grounds,
that some method be found to shape or influence competition
in situations where it has become so intense as to lead to
consistent and large economic losses to individual teams
with no apparent prospect for a change in the situation, just
as this is essential where degrees of monopoly prevail and
persist. Losses from excessive competition jeopardize the
existence of the team; they may force a franchise to move
to another city, or even to terminate operations completely.
Similarly, monopoly can lead to profit windfalls and can
limit access of the public to goods and services at reason-
able prices.
Uncertainty regarding the continuity both of teams
and of leagues can be extremely wasteful, costly and disrup-
tive. A few years ago I had occasion to study the city of
Milwaukee, Wisconsin, and its surrounding trade area after
the transfer of the Milwaukee Braves to Atlanta in 1965. I
found that the direct and indirect effects of the operation
of the Milwaukee Braves from 19 53 to 1965 in the Milwaukee
metropolitan area totaled roughly $18 million per year.
This included direct spending by Milwaukee residents
and out-of-town visitors for tickets to baseball games, ad-
ditional baseball-related transportation expenses, lodging
for out-of-town teams and visitors, eating and drinking es-
tablishments associated with attendance at baseball games.
187
additional use of the stadium and its parking lots, and other
direct and indirect economic effects of the operation of the
Milwaukee Braves. It is extremely unsettling for business-
men to build up these essential services through investment
in plant and equipment and in trained personnel, only to see
the market collapse from loss of a franchise or failure of
a league to continue operations. It is especially shatter- •
ing to the public, and most especially to youngsters who
look to local team stars as models for their own actions on
the field or on the court, to see a team move on to another
city, as has happened all too often.
A Record of Instability
American consumers spend increasingly larger sums for
outside recreation and entertainment, and still the industry
is extremely vulnerable financially. The history of profes-
sional basketball is a record of instability, insecurity of
tenure, and of movement of teams from city to city. It is
a history that seems likely to be repeated unless some solu-
tion is found to the fundamental economic problems of the
sport.
Today's teams are located in many of the largest mar-
ket areas. The public has shown strong support for the game.
Now it is essential to seek greater financial stability for
both players and teams as a means of encouraging balanced
competition, geographic continuity, and access to profession-
al sports by all the people who want such access.
A brief look backward is sobering in this regard.
The National Basketball League was formed in 1937. Its
operations were, of course, influenced and disrupted by
World War II, but it survived and in 194 5 consisted of 12
188
teams. Many were in cities which now seem to have been un-
likely choices in view of the relatively small market area
served. Of the 12 cities represented in 1945, only two now
have professional basketball teams.
Many of the teams were semiprof essional in character,
often with business firms as sponsors . In this , the National
League teams resembled the teams of the Amateur Athletic
Union (AAU) , the most famous of which was the Oilers of
Bartlesville, Oklahoma, sponsored by the Phillips Petroleum
Company .
The National League in 1945 included:
Rochester Fort Wayne
Syracuse Indianapolis
Oshkosh Anderson
Toledo Youngstown
Moline Detroit
Chicago Sheboygan
The American League in 19 45 consisted of:
Philadelphia Baltimore
Pittsburgh Akron
Wilmington New York
In 1946 the Basketball Association of America (BAA)
began play, with Eastern and Western Divisions as follows:
Eastern Division Western Division
Washington Chicago
Philadelphia St. Louis
New York Detroit
Boston Cleveland
Toronto Pittsburgh
Providence
189
By 1947, however, Toronto, Detroit, Cleveland, and
Pittsburgh had failed. The remaining seven-team league took
in the Baltimore Bullets from the American League, which had
ceased to operate.
The 1948-49 season began with the National League and
the Basketball Association of America in operation. Competi-
tion for talent was keen. College players were playing off
one league and one team against the others in negotiations,
and established professional players were moving around fair-
ly freely among teams and between leagues. The 194 7-4 8 sea-
son of the Basketball Association of America was completed,
but it was a financial disaster for the league and for many
of the teams .
At the start of the 1948-49 season, four of the
stronger National League teams (Minneapolis, Indianapolis,
Fort Wayne, and Rochester) joined the BAA to make it a 12-
team league. This reduced the National League to eight teams,
and after the 1948-49 season the two operated as one league.
The BAA was renamed the National Basketball Association (NBA) ,
with the following teams in the 1949-50 season:
Eastern Division Western Division Central Division
Philadelphia Indianapolis Minneapolis
Baltimore Anderson Rochester
Washington Tri-Cities Fort Wayne
New York Sheboygan Chicago
Boston Denver St. Louis
Syracuse Waterloo
At the end of the NBA's first season of operation,
Denver, Sheboygan, Waterloo, Anderson, Chicago and St. Louis
ceased to operate. This left 11 NBA teams for the 1950-51
season. Play continued, but more teams dropped out, leaving
only Syracuse, New York, Philadelphia, and Boston in the
78-465 O— 72— pt. 1 13
190
Eastern Division and Rochester, Minneapolis, Milwaukee, and
Fort Wayne in the Western Division by the 1954-55 season.
This small league was the only professional basketball league
in operation during the late 1950 's and the early 1960 's.
Beginning in 1960, more franchises were authorized. There
were 14 NBA teams by 1968-69, and 17 in the 1970-71 season.
The later stage of NBA growth coincided with the es-
tablishment of the present American Basketball Association
(ABA) in 19 67-68. The ABA had 11 teams at the start and the
same number in the 1970-71 season. No ABA franchises have
been terminated, but they have moved around a great deal.
Only four of the 11 teams now operating remain in the city
where they started. Seven cities which had ABA franchises
between 1967 and 1970 did not operate in the league during
the 1971 season. (More detailed information on both NBA and
ABA history is shown as Annex A.)
Financial Instability
The key factor leading to so many changes in the n\am-
ber of basketball leagues operating and in the number and
location of the teams comprising those leagues over the past
20 years has been financial instability. I want to describe
very briefly to the Committee the recent financial results
of professional basketball operations, so far as teams or
franchise owners are concerned, and to identify the under-
lying causes of these results.
Before that I should mention that the high degree of
instability of the teams made it difficult to get full
financial records in all cases. Even with the cooperation
of league offices and teams in both leagues, we did not get
191
complete financial statements for all teams for all recent
years. In the exhibits and examples I will present, the
nximber of observations on which our judgments are based will
usually be given. We believe we have more than adequate
data to substantiate the conclusions we have drawn.
Where accounting practices were different, we have,
with the help of a skilled accountant, made the information
furnished to us as comparable as possible.
Finally, the question of handling deferred compensa-
tion provisions of contracts is a complex one. Superstars
often have deferred payment contracts. Deferred compensation
is handled in such diverse ways by the various teams that it
is almost impossible to take it fully into account and to
treat it similarly from team to team. Subject to these quali-
fications, I want to present to the Committee some of the
key financial evidence which reveals professional basketball
to be an extremely precarious business from the financial
standpoint at the present time.
The ABA
Looking first at the American Basketball Association,
which has operated for 4 years, we have financial informa-
tion from the teams covering 39 out of a possible 44 yearly
operations (11 teams for 4 years) .
For each team, all the profit and loss statements have
shown operating losses. In some cases these losses have been
large, as shown in Annex B, table B-1. The frequency distri-
bution of operating losses shows that on two occasions, teams
of the American Basketball Association incurred operating
192
losses in excess of $1 million per year. In one-third of
the 39 years of team operations we examined, operating losses
were between $500,000 and $1 million. In nearly half of
these observations operating losses fell between $250,000
and $500,000 per year. In the remaining six cases, losses
were below $250,000 per year.
The most remarkable thing about this situation is that
the American Basketball Association with 11 franchises remains
in operation after this record of dismal financial performance.
The movement of the franchises described earlier can be better
understood in the light of these recorded financial losses.
The NBA
NBA teams furnished us with financial records for 67
out of a possible 81 separate years of operations since the
1964-65 season. This involved at least one report from all
of the 17 teams now operating in the NBA.
The NBA financial picture is somewhat better than the
ABA, but hardly affluent. Of the 67 operating years examined,
25 were profitable and 42 were not. The frequency distribu-
tion shows 45 percent of the annual losses under $250,000,
33 percent between $250,000 and $500,000, and 22 percent
over $500,000 per year. Two cases, the same as for the ABA,
had annual losses over $1 million in a year.
When we look at the source of profits for NBA teams,
however, we see that in at least five cases profits did not
arise out of operations, but out of expansion of the league.
Without income from sale of franchises , these teams had
losses. Since 1966 the National Basketball Association has
193
expanded the number of teams from 10 to 17. This was done
by sale of new franchises, the receipts of which went partly
to the league office and partly to the existing teams. For
example, those teams which have been operating throughout
the entire recent expansion period and which shared, there-
fore, in the receipts from all the new franchises authorized
in the past 5 years, have had receipts of approximately
$1 1/2 million each from this source.
Profits and losses, and their frequency distribution
for NBA teams, are shown in table B-2, Annex B.
The occasional profitable operating years in the NBA
have not prevented the accumulation of large losses by most
of the teams. From the latest balance sheets available to
us, representing 13 of 17 franchises presently operating,
we found that only two teams had reported accumulated profits
over their entire period of operation, while 11 teams had
accumulated losses.
The deficits of the 11 NBA teams showing more or less
consistent losses have totaled $10,038,402 during the period
of operation of the teams. This is made more significant by
comparison with the $9,604,117 investment made in these teams
(capital stock or partnership contribution) . These 11 teams
show a negative net worth today of $434,285.
One of the two teams showing consistent profits (of
those teams for which records are available) averaged
$617,000 profit per year over 4 years, and the other averaged
$138,000 per year over 6 years.
194
Gate Receipts Versus Payroll
Professional basketball teams derive their principal
operating receipts from the sale of tickets and from tele-
vision and radio rights. There have been some extraordinary
receipts in the National Basketball Association from the sale
of franchises, as noted, but these cannot be considered
normal receipts. The largest item of expense is the pay-
roll -- the salaries of the basketball players.
We find an interesting relationship between principal
receipts and principal expenses for many of the teams. For
the American Basketball Association, in 9 of 23 operating
years for which information was available, annual player pay-
rolls were in excess of total receipts from the sale of
tickets to games and from radio and television rights.
These percentages are not new or surprising informa-
tion. They represent simply another way of indicating the
large financial losses that have occurred, and the reasons
for the losses.
Causes of the Financial Condition
of Professional Basketball
One factor stands out among all others when we con-
sider the fundamental reasons for the current financial
losses and the continuing instability of professional basket-
ball teams. This is the sharp increase in the salaries of a
relatively few players, especially rookies and especially
over the past four seasons, when both the National Basketball
195
Association and the American Basketball Association were in
operation.
On the surface, professional basketball appeared to
be an expanding and vigorous industry in those years. The
number of teams was increasing; a number of cities were ask-
ing for franchises; attendance was increasing; and player
salaries were rising sharply. But the financial results,
as already revealed, showed a different story. The marked
rise in current salaries and bonuses , and the deferred com-
pensation to a few rookie superstars in the past few years
when the two leagues have been competing for talent, appears
to have been a major factor in precipitating poor financial
results.
I have a number of charts and tables marked Annex C
that set out salary increases, the uneven distribution of
those salary increases between a few high-priced players and
the many who received more modest compensation, and the key
role rookie superstars play in this situation. In this mat-
ter, Mr. Chairman, I want it to be clear that I favor oppor-
tunities for high salaries for proven stars. I believe the
proposed legislation will preserve such opportunities and
at the same time facilitate strong and sound competition.
NBA Players
Chart 1 of Annex C shows that the average of the
salaries of three highest-salaried players on each NBA team
in the 1967-68 season was $57,000 per year. This salary
included the salary actually paid in that year as reported
by the team, plus the amount of deferred compensation when
196
such compensation was included in the player's contract,
prorated over the years of the contract. However, these
salary figures do not include bonuses, playoff earnings,
housing allowances, new cars, or other miscellaneous bene-
fits of cash value.
In the same 1967-68 season, the average salary of all
the other players on the teams in the National Basketball
Association for which reports were available was $17,000 per
year, or 30 percent of the top three players' average
salaries.
During the past four seasons the salaries of both
groups of players rose sharply. In the 1970-71 season the
salaries of the three top players on each of the NBA teams
averaged $92,000, compared with $57,000 in the earlier
period. The average salary of the remaining players in the
league had also risen substantially, to $33,000 per year,
about 36 percent of the level of the three highest-paid men.
The absolute increases from 1967-68 to 1970-71
amounted to $35,000 in the case of the top three players
and only to $16,000 for the other team members.
The absolute difference between the average salaries
of the "top three" and the "all other" categories had widened
a great deal, going from $40,000 to $59,000.
The ABA
Salaries in the American Basketball Association have
shown a similar trend, but average salaries for both the top
and other players are at much lower levels. This is seen
197
in the relative height of the bars in the first two charts
in Annex C .
In the ABA, the average salary of the top three
players in each team increased from $16,000 to $42,000 from
1967-68 to 1970-71, an increase of 163 percent.
The average salaries of the remaining players in-
creased from $12,000 in 1967-68 to $20,000 in the 1970-71
season, a 67 percent increase, thus widening the difference,
both in absolute and proportionate terms, between the two
groups.
Further Comparisons Relating
to Rookies
I call the Committee's attention to several other
important indicators of player compensation which are pre-
sented in Annex C. The first is chart C-3, showing average
starting salaries of draft choices in the National Basketball
Association for the period 1960-71. This chart shows a marked
upward trend since the 1966-67 season. Average starting
salaries of draft choices ranged from around $8,000 per year
in 1960-61 to $12,500 in 1966-67. With the entrance of the
American Basketball Association, however, competition for
draft choices -- the stars and superstars of college play —
increased sharply. Average salaries of NBA draft choices
rose nearly four-fold to $46,000 per player in the 1970-71
season compared with 19 66-67.
Now I want to focus specifically on rookie salaries
in both leagues to show the effects of unrestrained bidding
competition between leagues. Charts C-4 and C-5 show that
rookie superstars have been commanding substantially higher
198
contracts, not only in relation to other rookies but to
veteran players as well.
In the NBA, rookies in the "top three" player salary
category of a teaun (only one player) averaged $50,000 in
1967-68, and those in the "top three" (12 players) in 1970-71
averaged $114,000.
In the ABA, the comparable rookie averages nearly
tripled, from $15,000 in 1967-68 to $44,000 in 1970-71.
Both of these increases were proportionately higher than
those in charts C-1 and C-2 where both veterans and rookies
are averaged together in the "top three."
The experience of other rookie players has been quite
different. In the NBA in 1967-68, "all other" rookie salar-
ies averaged about $15,000; whereas in 1970-71 they had
risen to $26,500, an increase of 77 percent. In the ABA in
the same period, "all other" rookie salaries went from
$11,000 to $17,500, an increase of only 59 percent. So we
see that both in the NBA and in the ABA, rookie superstar
salaries rose substantially more sharply than those of
players of top veteran status, while the salaries of other
rookie players in relative terms rose less than those of
journeyman players.
As noted above, based on salaries provided to us by
the ABA office and team owners, the ABA rookie superstar
average was $44,000 in 1970-71. This was considerably less
than the $114,000 average in the NBA.
The final exhibit in Annex C shows that the ABA teams,
in the latest bidding war this past spring, negotiated a
199
number of contracts that were of unprecedented proportions.
With the assistance of the league office and the teams, we
identified the player contracts shown in table C-6 , and have
recorded the total compensation of the newcomers who signed
for the 1971-72 season and beyond. Total compensation in-
cludes salary, bonuses, deferred and other compensation in-
cluding automobile and housing allowances, jobs granted to •
relatives of the players, blocks of season tickets for home
games, etc.
In this group of ABA rookies , the collegiate super-
star who negotiated the highest contract will receive the
equivalent of $317,000 per year over his three-year contract.
The lowest paid will receive $46,667 per year. The overall
average for these players is about $117,000 per year.
These extremely high contractual obligations place
a serious new financial drain on the clubs, and they make the
negotiating posture more difficult for regular players of
great talent, but less than superstar calibre.
It would appear advantageous for a team to sign a
player at a high price and not be required to pay that full
price entirely out of current earnings or current assets.
This reduces the immediate cash flow, and encourages the
hope that something will come along to salvage the financial
position of the team.
We have found that it is not general practice and,
in fact, is the exception to fund these future obligations.
They are considered to be payable at some future time, but
no provision is made out of current team receipts or earnings
to build full reserves for that future compensation, even
though it is earned during the limited contract period.
200
Attendance
I wish to comment on one further aspect of economic
instability in professional basketball and its underlying
causes. The financial condition of the existing franchises
would not appear to result from a lack of spectator interest
in the sport. As shown in Annex D, total attendance at the
games of both leagues shows a remarkable series of increases.
Year after year in both leagues , more people have been view-
ing live professional basketball. But the rise in revenues
has been out-paced by fast-rising costs.
In the NBA, some of the increase in total attendance
is the result of expansion in the number of teams in the
league in the late 1960 's. There have been no franchise ad-
ditions in the ABA, but total attendance has been going up
rapidly, with the 1970-71 attendance almost double that of
1967-68. In the NBA, 1970-71 attendance was more than twice
the total attendance in 1966-67, the last year of play before
formation of the ABA.
To put both leagues on a strictly comparable basis,
average attendance figures per regular season game are shown
in Annex D, chart D-3 . Average attendance grew from 2,805
persons in 1967-68 to 4,925 last season. This is an increase
of 76 percent, or an annual average growth rate of 20.6 per-
cent.
The NBA experienced slower growth, with a 28 percent
increase in per game attendance over the period, or an 8.6
percent average annual increase. This is a far better record
than the NBA had from 1960-61 to 1966-67, the seven seasons
prior to the formation of the ABA. Over that entire period.
201
regular season attendance per game increased 20.7 percent.
The average annual growth rate was only 3.8 percent.
The important conclusion to be drawn from the attend-
ance records is that we must look beyond spectator demand
for the sport for the fundamental causes of recurring finan-
cial losses. We have been living in a period of extra-
ordinary increases in demand for professional basketball,
as shown by attendance figures. Gate receipts increased
even more, since there have been some increases in average
ticket prices. Some rise in ticket prices may continue over
time but the teams must take into account the price elas-
ticity that will surely affect the attendance. One must
look to the fundamental structure of the industry for causes
and for remedies when large financial losses are incurred
despite a rapid growth in demand.
Prospects If Professional Basketball
Continues on the Present Basis
If the National Basketball Association and the American
Basketball Association continue to function in the future
as they have in the past, we must expect a continuation and
perhaps an escalation of the adverse economic and financial
factors which have been at the root of team and league in-
stability in recent years. There will be even more intense
competition for the limited number of famous young players
of superstar potential as the competitive struggle quickens.
Current and future salary obligations will increase further.
And there may even be a further proliferation of teams when
an opportunity is seen to attract a particular key player.
Teams will move from city to city, and in my opinion some
franchises will fail. The economic effects can be disastrous
for many owners, players and fans.
202
I called attention earlier to the fact that all the
teams in the American Basketball Association and most of the
teams of the National Basketball Association have had operat-
ing expenses in excess of gross operating receipts during
recent years. Extremely large losses have been incurred by
a number of teams, and continuation of such losses is pro-
jected on the basis of contracts already entered into rela-
tive to prospective receipts from the sale of tickets and
from concessions.
The end result of such a situation will be most un-
satisfactory .
1. The financial supporters of a number of teams can
lose heart and look for opportunities to move the franchises
to other cities. Efforts by owners of franchises to salvage
their investment will inevitably lead to losses of capital
and of future income by those who have made investments on
the economic periphery of the professional basketball team.
Cities which have built or improved arenas, concession opera-
tors, parking establishments, players who have established
their families in the city where they play, and many more
will lose financially.
2. Some mobility is desirable, but frantic searching
for new locations and frequent movement of teams to new cities
is not orderly change. It represents, instead, a chronic
emergency for many cities and teams. This is not the kind
of team environment calculated to build effective competition
in the leagues, or a sound financial basis for the players,
the team owners, the leagues, and many others.
3. Those who have been absorbing the financial losses
of the professional basketball teams will try to pass those
203
losses on to others through sale of the franchise. They may
find additional wealthy persons or well-financed groups (either
in existence or that could be formed) willing and able to
withstand large losses for some years, for the prestige in-
volved or in the hope of eventual financial gain. But, there
are distinct limits to the number of persons who want to risk
their fortunes on such chancy enterprises. And there are
only a limited number of yet untried cities in the United
States with the market potential , in terms of people and level
of income, to support further professional athletic teams
at cost patterns that prevail.
Merger Can Contribute to
Stabilization of Professional Basketball
The merger of the NBA and the ABA is designed to estab-
lish a climate of financial and economic stability within
which effective and constructive competition can prevail
among the teams of the proposed enlarged National Basketball
Association. The merger would give the team owners, the
players, and the league an opportunity, subject, of course,
to full anti-trust regulation, to rationalize a great many
factors associated with the economic health of the sport.
This includes broadcast rights for television and radio,
team-player relationships, expansion of franchises to new
cities, and the relationship of professional basketball to
college basketball. It would help to abate the present ex-
treme competition between the leagues for rookie superstars,
reducing the financial drain which has been a major cause
of operating losses, and may also have limited the oppor-
tunity of most players to achieve optimum salary levels.
The merger would thus provide the possibility of fi-
nancial opportunity and stability for the owners of the teams.
204
and would help to insure continuation of the league, the
development and stability of each professional basketball
team now operating, and the possibility for expansion of new
teams to other cities.
In addition to substantially limiting the drain on
the financial resources of the clubs, features of the pro-
posed NBA player contract would assure a strong and fair
bargaining posture for all players. These features are set
out in the five-point contract offer made by the NBA Players
Association, as explained in testimony by Senator Kuchel.
It is my firm belief that these contract features ,
operating in the context of a single league, will be of bene-
fit to the great majority of professional basketball players
and to the teams. They provide players the opportunity to
bargain with teams other than the team that has held their
contract, if such teams show an interest in the services of
the player in question.
At the same time, the proposed contract provisions
would permit a team simply to match the offer of any compet-
ing team in order to keep a key player , or to receive some
compensation from the acquiring club. Yet, by terms of the
proposed arrangement, the compensation, in my opinion, would
be rather moderate, and it could not be related to any con-
sideration of fair market value as that term is customarily
used in connection with the contracts of professional
athletes .
I have every confidence, based upon long experience
in labor-management negotiations, in arbitration proceedings,
and in various contractual relationships among individuals
and firms, that except for rookie superstars, professional
205
basketball players will enjoy a secure bargaining position
under the new system.
Development of a more equitable distribution of team
payrolls will be one of the most important features resulting
from the merger of the leagues and from the revised contract
provisions that have been put forward. So long as the present
situation continues, stratospheric rookie contracts will make
it difficult to arrive at a rational salary structure for all
players .
Summary
Having examined the financial situation, the degree
of franchise stability, and the factors which determine
profits and losses for professional basketball teams, it seems
clear to me that a change in the structure of the industry
is in order. It is needed to bring into being a new era of
healthy and workable competition, with improved financial
opportunities and security for players and teams, expansion
of teams as demand for professional basketball requires, and
a general aura of continuity and stability.
If the present patterns of competition, recruitment,
contract settlements, and financial results persist, a des-
perate struggle for survival seems certain. It may well
end, in my opinion, in curtailment of the industry, reduced
competition among teams, and disillusionment among the fol-
lowers of professional basketball.
78-465 O— 72— pt. 1 14
206
ANNEX A
RECORDS OF FRANCHISE SHIFTS AND FAILURES
IN THE NATIONAL BASKETBALL ASSOCIATION
(NBA) AND THE AMERICAN BASKETBALL
ASSOCIATION (ABA)
NBA and Predecessor Leagues
Since 1947, 15 teams have failed completely; there
have been 10 franchise relocations. The teams presently
operating and the predecessor teams or locations (indented
below) are as follows:
Teams Years Active
Atlanta Hawks 1969-
St. Louis Hawks 1956-68
Milwaukee Hawks 19 52-55
Tri-Cities Blackhawks 1950-51
Baltimore Bullets 1964-
Chicago Zephyrs 19 63
Chicago Packers 1962
Boston Celtics 1947-
Buffalo Braves 1970-
Chicago Bulls 1966-
Cincinnati Royals 1958-
Rochester Royals 1949-57
Cleveland Cavaliers 1970-
Detroit Pistons 1958-
Fort Wayne Pistons 1949-57
Los Angeles Lakers 1961-
Minneapolis Lakers 1949-60
Milwaukee Bucks 1968-
New York Knickerbockers 1947-
Philadelphia 76'ers 1964-
Syracuse Nationals 1950-63
Phoenix Suns 1968-
Portland Trailblazers 1970-
Houston Rockets 1971-
San Diego Rockets 1967-70
San Francisco Warriors 1963-
Philadelphia Warriors 1947-62
Seattle Supersonics 1967-
207
ABA
A total of 11 franchises have operated since the in-
ception of the league in 1967-68. Of this number, only four
are still in operation in their original location. These are
Denver, Indiana, Kentucky and Dallas.
No franchises have folded completely and none have
been added. However, Anaheim, Minnesota (twice). New Orleans,
Oakland, Los Angeles, New Jersey and Washington, D.C., have
lost ABA teams without replacement. Pittsburgh has seen a
franchise leave but replaced 2 years later. Memphis was
threatened with bankruptcy at the end of the 197 0-71 season
but was revived through the efforts of the league office and
other ABA franchise owners .
ABA record of franchise locations:
Teams Years Active
Dallas 1967-
Denver 1967-
Indiana 196 7-
Kentucky 19 67-
Utah 1970-
Los Angeles 1968-69
Anaheim 19 67
Carolina 1969-
Houston 1967-68
Floridians 1968-
Minnesota Muskies 19 67
Memphis 19 70-
New Orleans 1967-69
New York 19 6 8-
New Jersey 19 67
Virginia 1970-
Washington 19 69
Oakland ' 1967-68
Pittsburgh 1969-
Minnesota Pipers 19 68
Pittsburgh 19 67
208
NBA and predecessor league (BBA) teams which are now
defunct:
Teams Years Active
Anderson Packers 19 50
Baltimore Bullets 1948-55
Chicago Stags 1947-50
Cleveland Rebels 1947
Denver Nuggets 19 50
Detroit Falcons 19 47
Indianapolis Jets 19 49
Indianapolis Olympians 1950-53
Pittsburgh Ironmen 19 47
Providence Steamrollers 1947-49
St. Louis Bombers 1947-50
Sheboygan Redskins 1950
Toronto Huskies 1947
Washington Capitals 1947-51
Waterloo Hawks 19 50
Source: Leonard Koppett, Twenty-Four Seconds to
Shoot: An Informal History of the National
Basketball Association (N.Y.: Macmillan,
1968) , pp. 265-266.
209
ANNEX B
FINANCIAL INFORMATION, NBA AND ABA TEAMS
(Teams are identified only by number
since much of the financial in-
formation is confidential)
Table B-1
Losses of ABA Teams, 1967-68 Through 1970-71
(in 000 's of dollars)
Team
1970-71
1969-70
1968-69
1967-68
1
1,167
734
473
281
2
466
877
628
303
3
801
475
372
412
4
750
447
390
387
5
735
681
n.a.
n.a.
6
269
12
127
313
7
1,117
397
489
n.a.
8
7
76
198
335
9
526
467
207
259
10
n.a.
750
750
914
11
766
n.a.
823
335
Possible number of reporting years
Actual number reported
Percent covered
Years showing profits
Years showing losses
44
39
89
39
Frequency Distribution of Operating Losses
Thousands of dollars
0-249
250-499
500-749
750-999
1,000 and over.
Subtotal. . . .
Not available.
Total
Number
2
39
5
44
Percentage
15
46
12
20
5
100.0
Source: American Basketball Association and member teams
210
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211
ANNEX C
PLAYER SALARY ANALYSES, NBA AND ABA
(Players are identified only by number)
212
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218
ANNEX D
ATTENDANCE AT NBA AND ABA REGULAR SEASON
AND PLAYOFF GAMES
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78-465 O— 72— pt. 1-
-15
222
Senator ER\r[x. The subcommittee will stand in recess until 10 :
tomorrow in room 2228.
(Whereupon, at 6:10 o'clock p.m., the hearing was recessed, to
reconvene at 10 a.m., Wednesday, September 22, 1971.)
(Testimony resumes on p. 225.)
Senator Ervin. Senator INIoss of Utah has requested me to insert
his statement in the record.
(Senator Moss' statement follows:)
Statement of Senator Frank E. Moss (D-Utah), Antitrust and Monopoly,
Subcommittee, Senate Committee on the Judiciary. September 22, 1971
Subject: S. 2373, Pro-Basketball Association Merger
Mr. Chairman, I am delighted to have this opportunity to voice my strong
support for the Pro-Basketball Merger Bill this Committee is considering
today. Those of us co-sponsoring this measure believe it will provide the stabi-
lizing influence needed to let pro basketball realize its fullest potential.
The sport of pro basketball has grown dramatically in recent years. League
attendance has increased by some 238 percent since 1965, and with the forma-
tion of the American Basketball Association in 1967, the number of major
league franchises now has increased from 10 to 28 teams. Despite this impres-
sive record of expansion, professional basketball finds itself caught in a severe
financial pinch. This is a direct result of a senseless and self-defeating bidding
war for player talent fought by the two separate and independent leagues —
The National Basketball Association and the American Basketball Association.
Consequently, as a recent survey notes in the July 5, 1971, issue of U. S. News
and World Report, only 3 of 28 teams are reportedly operating at a profit
today. Obviously, Mr. Chairman, if this open warfare between the two leagues
is allowed to continue, the future of pro basketball, in spite of its great popu-
larity throughout the nation, will be bleak indeed.
Major league basketball, with revenues of .$40 million last year, clearly is
big business today. This is particularly true when we take into account the ad-
ditional millions of dollars in investment that has gone into the construction
of facilities needed to accommodate the sport and the many supporting busi-
ness enterprises that are required to service the needs of the fans and the
teams. Nevertheless the point should be emphasized that the sport — like all
other professional team sports — is distinct from all other businesses in one
critical respect. Namely, it must maintain a system of balanced competition
among all teams if it is to survive as a thriving business.
We are all aware that the lifeblood of competition of any professional team
sport is the ability of a team being able to beat any other team in the league
on any given day. Moreover, the closer the race maintained between competing
league teams, the greater is the overall benefit to the fans, the team owners
and the players. The maintenance, therefore, of "balanced competition" in pro-
fessional basketball serves the best interest of the sport and that of the com-
munities located in 23 States which have the privilege of possessing a major
league franchise.
Given these essential criteria, it is clear to me that professional basketball
is in troubled waters. The system of balanced competition in each of the two
leagues has been greatly undermined by the cut-throat competition engaged in
by league teams for player talent. When teams are forced to go as high as $2
million in salary payments to an untried college player and when each of 5
teams in the 1969-70 season paid out more in salaries than its entire gross
revenue, we must conclude that matters have gotten badly out of hand. Both
leagues have finally come to this realization and now wish to merge so as to
bring an end to this mutually destructive bidding war for player services.
We Utahans are particularly proud of our Utah Stars, the 1971 ABA Champions.
The Utah Stars operate in the smallest populated area of any team in any
major league professional sport. The Utah Stars, however, last season in 42
regular season home appearances attracted 262,342 fans to break the previous
ABA first-year record of 2.54,163 set by the Carolina Cougars in 1969-70. More
impressively, the Stars exceeded the NBA first-year attendance record by some
223
50,000. Another 100,895 fans attended the nine home playoff games to increase
the total home attendance for the year to 363,237, an excellent average of
7,122 per game.
In addition, the Utah Stars won the American Basketball Association cham-
pionship and therefore benefited from playoff revenues. Nevertheless, I am in-
formed by Mr. Bill Daniels, President of the Utah Stars, that the Utah Stars
had a loss of $465,000.00 last year.
A merger between the NBA and ABA is vital to the success of the Utah
Stars. A merger will not only bring fantastically high salaries in line through
a common draft, but will also allow the Utah Stars to share in national televi-
sion revenues. Finally, a merger will enable Utah fans to see professional
teams from all areas of the country thereby continuing basketball enthusiasm
on a high level.
Because professional basketball, like professional football, has been ruled by
the courts to be subject to jurisdiction of our nation's antitrust laws, the
leagues would be in violation of these laws if they merged without prior Con-
gressional approval. In the recent court suit filed by the NBA players to block
the proposed merger, the Federal District Court judge ruled in principle that
the merger would be illegal in the absence of a Congressionally approved anti-
trust exemption. Consequently the ABA and NBA are now petitioning the Com-
gress to grant such an exemption so that they can get on with the job of com-
pleting the merger, a merger which I believe most of my colleagues in the
Senate and House will agree clearly serves the best interest of the public.
In essence, S. 2373 provides for the same exemption approved by the Con-
gress for professional football in 1966. The exemption is limited only to the
context of the proposed merger and accordingly would allow the merger pro-
vided that two conditions are fully met: (1) that such an agreement does not
result in the reduction of the number of pro basketball franchises now operat-
ing, and (2) that the provisions of any joint agreement between the two pro-
fessional basketball leagues be dirccthj relevant to the merger.
In my view this legislation has been carefully drafted to assure that the an-
titrust exemption applies only to the merger and there is absolutely no way
that this legislation can be interpreted in any broader terms. Once the merger
is finalized, professional basketball will be fully subject to antitrust enforce-
ment.
As you well know, Mr. Chairman, professional football has benefited im-
mensely from the exemption granted by Congress in 1966. As noted in a recent
article in the Wall Street Journal (Sept. 16, 1971. p. 1). "Home contests of
more than half the 26 NI'L teams already are sold out, or close to it, through
sales of season tickets. National Football League oflScials happily predict a re-
play, or better, of last year's record regular-season turnout of 9.5 million spec-
tators nearly 91 percent of all seats were sold, and many teams had total sell-
outs." As basketball, professional football was in a similar state of disorder
prior to tlie 1966 action taken by Congress. The sport, however, is generally in
very sound financial condition and there is no questioning the fact that the
competition among the various league teams is far more balanced today than
it was five years ago.
Pro basketball, on the other hand — despite its rapid growth — is not in sound
financial condition and the system of balanced competition is fast deteriorat-
ing. Thus, it stands to reason that some form of remedial action is urgently
needed. I believe tlie legislation which your committee is considering today
will provide the stabilizing influence needed to let pro basketball realize its
great potential. Therefore. I urge the Congress to enact this bill at the earliest
possible date. Then the league owners can get on with the job of promoting
the sport in a manner which best serves the interests of the fans, the players
and the owners themselves.
Thank you.
THE PROFESSIONAL BASKETBALL LEAGUES
WEDNESDAY, SEPTEMBER 22, 1971
U.S. Senate,
Subcommittee on Axtitrust axd Moxopoly
OF the Committee on the Judiciary,
Washington^ D.C.
The subcommittee met, pursuant to notice, at 10 :05 a.m., in room
2228, New Senate Office Building, Senator Sam J. Ervin, Jr., presid-
ing.
Present : Senators Ervin, Hart, Tnnney, and Hruska.
Also Present: Howard O'Leary, chief counsel and staff director;
Wilbur D. Sparks, assistant counsel ; Peter N. Chumbris, chief coun-
sel for the minorit}^; Patricia Bario, editorial director; Eobert
Bland Smith, Jr., aide to Senator Ervin; and Janice Williams,
clerk.
Senator Ervin. The subcommittee will come to order.
I would like to make this observation: There is a certain spirit
that seems to dominate men who seek to have other human beings
placed under economic bondage to them. We have no field of athlet-
ics where men are more under economic bondage than in the major
baseball league teams. They are not covered by the antitrust laws
and it appears that the owners of those clubs, they sit around the
table and they apportion among themselves economic skills of base-
ball at least, and when they sit around the table together they
usually operate on the principle that you scratch my back and I will
scratch yours when it itches.
So we had Mr. Short yesterday taking a major league baseball
team from the capital of our country where they have enjoyed base-
ball, as I understand it — as ancient as I am — since the time I has
about 2 or 3 years old.
I remember as a child reading about Walter Johnson, what a
great pitcher he was, and it will illustrate, you Imow, the attitude, I
think, that the public be damned. In other words, the Nation's Capi-
tal is not entitled to have a jnajor league baseball team anymore
because of a man who bought the franchise here, and those who hold
similar franchises who want to move them when they can, most of
them voted to let him move from the Nation's Capital.
The group that is before this subcommittee asking that they be
given exemptions from antitrust laws and be permitted to subject to
economic bondage young men of this country who have a skill in
basketball teams did precisely the same thing for the nation's capi-
tal.
You had a franchise here in the basketball field. It is true it was
not prosperous but it did allow the people in the Nation's Capital
(225)
226
the rio;bt to fjo to a basketball game played by major leagues in the
Cai)ital. So the men that are now asking Congress to give them eco-
nomic bondage power over skilled athletes in basketball, they gave
the owner of the AVashington franchise pecuniary benefits totaling
$1,750,000 to move that team on down to Virginia and rename it the
Virginia Squires in order that the Baltimore Bullets might compel
every person in the District of Columbia who wanted to see a major
league basketball game to journey 40 miles for the privilege of
seeing it.
Now, when people have an attitude toward the Nation's Capital
that the ])u])lic be damned, I tliink it requires a considerable amount
of what is called in common parlance "brass," to come and ask the
representatives of the public in the Congress to give them exemption
from the antitrust laws which will enable them to divide the human
beings who possess skill in the basketball field around — divide them
around a table just like so many cans of pork and beans. In fact,
this proposal is that we leave our people who have pork and beans
subject to the antitrust laws but take human beings, move them from
the protection of the antitrust laws. And I sincerely trust that the
Congress of the United States will not rob any athletes of their
freedom to contract and to sell their skills to the highest bidder for
the highest price obtainable.
They say it is necessary. William Pitt gave the answer- — the plea
of necessity — in the British Parliament in 1783 when he said "necessity
is the plea for every infringement of human freedom."
So we have these clubs coming here and asking that human free-
dom be infringed for their benefit and they say they are losing
money. And the fact is that the value of the franchises they hold
keeps rising and rising and rising all the time on the market and
nobody has yet offered an explanation for that.
I think as a result of what happened here with respect to the
Washington Senators that Congress ought to give serious considera-
tion to the question of passing a bill without delay which would put
baseball under the antitrust laws. I think Congress should give seri-
ous consideration to the question of repealing the special privilege
that it gave to the football leagues. And I think above all things, it
ought to reject a bill such as that whicli we now have pending
before this committee.
Does anybody else have any comment ? If not, counsel will call the
first witness.
Mr. O'Leary. Mr. Chairman, the first witness this morning is Mr.
Lawrence Fleisher. Mv. Fleisher is the counsel for the National
Bastketball Association Players.
STATEMENT OF LAWRENCE FLEISHER, ESQ., GENERAL COUNSEL,
NATIONAL BASKETBALL PLAYERS ASSOCIATION, ACCOMPANIED
BY IRA MILLSTEIN, WEIL GOTSHAL & MANGES, NEW YORK, N.Y.
INIr. O'Leary. INIr. Chairman, INIr. Fleisher is accompanied by our
second witness this morning, Mr. Ira INIillstein.
Senator Ervix. Just before he starts his testimony, I think it is
important that I read into the record this extract from a book called
227
Public Policy Toward Business, by Professor Clair Wilcox. He
says:
During the 1880's many of the country's major industries were brought
under some form of concentrated control. In petroleum, cottonseed oil, linseed
oil, meatpacking, cordage, sugar, lead, coal, whiskey, tobacco, matches, gun-
powder and elsewliere power over markets was attained through the devices
of monopoly.
As this proce.ss continued, many groups in the community suffered injury.
The farmers, in particular, experiencing a persistent decline in farm prices,
complained of high freight rates charged by the railroads, high interest rates
charged by the banks and high prices charged by the makers of agricultural
implements and other manufactured goods. Producers of raw materials, where
manufacturing was monopolized, found themselves selling to a single buyer
who manipulated the market to depress the prices they received. Independent
businessmen, if they refused to be associated, were ruthlessly driven from the
field. All of these developments gave rise to widespread discontent with the
growth of corporate concentration.
It appeared that the welfare and independence of the common man were
threatened. With the disappearance of the frontier, it seems that the door of
opportunity was being closed.
These were exactly the conditions which caused the passage of the
antitrust laws, particularly the Sherman Act, sections 1 and 2, the
very provision by which the basketball owners now seek to escape in
order that they may enjoy a monopoly sanctioned and approved by
the representatives of the people of the United States in the Con-
gress of the T'^nited States. And I for one am not going along with
the proposition.
You may proceed.
Mr. Fleisiter. Thank you, Mr. Chairman.
On behalf of the Players Association, I would like to say that we
agree with your opening statement 100 percent. We are very happy
that you made it.
I would like to place into the record, Mr. Chairman, my formal
statement and then read a short portion of it for brevity and then
outline other parts of it.
Senator Ervin. That will be entirely satisfactory to the commit-
tee. And let the record show his entire formal- statement will be
printed in the body of the record following the witness' testimony.
Mr. Fleisher. My name is Lawrence Fleisher. I am the general
counsel for the National Basketball Players Association. I have held
that position since 1962. The Association is made up of all the active
players in the National Basketball Association, 204 active members.
I am testifying today in opposition to the proposed merger legis-
lation. We oppose the legislation because it will perpetuate inequi-
ties for the players who are the backbone of professional basketball.
We welcome these hearings. We hope to explore how professional
basketball works from an historical point of view and under the
present circumstances of two leagues. During the course of these
hearings we will present various witnesses who will explain in detail
aspects of the operation of professional basketball that have never
been noted before and, we believe, will indicate the reasons for
rejecting the legislation as proposed.
In order for you to fully understand the players' position, we will
show in detail the present legal status of the merger. We will
explain the lawsuit that was instituted in April, 1970, as a class
228
action filed by all of the players in the National Basketball Associa-
tion. We will explain the rulings of April and May of that year in
which two Federal judges in the southern district of New York had
no difficulty in declaring a merger between the two leagues illegal
under the "antitrust laws and therefore granted first a temporarj
restraining order and then a preliminary injunction. The prelimi-
nary injunction is in effect today.
We will also explain the many ways the owners have violated the
court order and have tried to undermine the players as litigants.
Our testimony will show that this proposed legislation does not
solve any of the true inequities of professional basketball, that the
language in the legislation only covers the tip of the iceberg and
that even if passed, the illegality of various practices existing in
professional basketball will endure.
We will introduce evidence which will show the one-sided nature
of the employer-employee relationship in professional basketball,
unique in the sense that except for other team sports no similar rela-
tionship exists in the United States. We believe there is no reason
for a system to exist which deprives the player of his right to nego-
tiate freely for his salary. We will show that to grant a merger for
the owners' economic necessity will be absurd. Over the last 4 ^^ears,
when there have been two leagues in existence, every franchise m the
National Basketball Association has increased in value dramatically.
New franchises have come into existence and have paid large fees
for the privilege of playing in the league.
Senator ER^ax. As I recall, they charge a person $1,250,000 merely
for an interest to receive the franchise ?
Mr. Fleisher. Well, Mr. Chairman, that was a few years ago. It
is now $3.8 million.
Senator ER^^[N. Certain people certainly pay a high price for the
privilege of losing money, don't they? [Laughter.]
INIr. Fleisher. We will have witnesses indicate the various side
benefits that exist, namely, interest in the construction and owner-
ship of stadiums, concession rights, ownership of cable TV compa-
nies, et cetera.
In addition, we will show where individual owners have used
public funds, through the use of municipal stadiums, for their own
advantage. Our testimony will indicate that because of the present
laws under the Internal" Revenue Code tremendous advantages are
presented by ownership of professional basketball teams, and that
owners of "franchises, by the nature of their enormous personal
wealth, are able to take maximum advantage of those tax laws.
We will show that what appears to be a paper loss on the opera-
tion of a franchise is, in most instances, a substantial gain. We will
indicate that the use of the amortization of players' contracts as a
means of taking tax deductions from ordinary income provides cash
benefits to the individual owner in excess of any asserted cash losses.
The end result of this economic discussion will show that, far from
being a losing proposition, the ownership of a professional basket-
ball franchise has been extremely remunerative, if somewhat unpub-
licized.
We will have testimony before this committee indicating the
adverse effects that the passage of the proposed legislation would
229
have on the black minority in the United States. We will show that
pro basketball, a sport in which over 65 percent of the players are
black, has a unique place in the lives of hundreds of thousands of
black children. How Congress treats the economic rights of black
basketball players who have escaped the ghetto by hard work will be
noted by all black Americans.
One of the arguments used in the introduction of the legislation is
the salutary effects that a merger had on professional football. The
players' association of football will testify that such effects have not
been salutary but, to the contrary, have involved tremendous hard-
ship to professional football players as a result of that merger and
will graphically show that professional football, in its economic
relations with the players, has receded back to the position profes-
sional basketball was in prior to the introduction of a second league.
In order to camouflage the sole purpose of the proposed legisla-
tion, the owners have introduced various superfluous arguments.
They have stated that providing for a single merged league would
allow the public to see a super game between the star players of the
National Basketball Association and the American Basketball Asso-
ciation or a championship game to determine an undisputed cham-
pion of professional basketball.
Games merely scheduled between the two leagues could accomplish
that. The all-star players in the National Basketball Association
played a game in INIay against the all-stars in the American Basket-
ball Association, and 24 million people witnessed that event on tele-
vision. There had been no merger. The game was promoted solely by
the players of both leagues. The owners themselves have scheduled
25 exhibition games between the two leagues beginning today, and
there is no merger in effect. Those games are being presented and
could be presented regardless of any agreement to merge. They pro-
vide the opportunity for fans in each team city to see the stars of
both leagues.
Now, if I may, Mr. Chairman, I think it important that I describe
professional basketball as it existed prior to 1967, at the time of the
advent of the American Basketball Association.
At that time there were 10 clubs in the NBA, and any basketball
player who had played high school ball and who had graduated
from high school, who wanted to play professional basketball, was
restricted from so doing. He had to either go to college and finish 4
years in college or he had to wait for an equivalent 4-year period.
He then became subject to what was known as the common draft
and only one club could choose him. He had no negotiating rights at
all except with that one club.
After he signed with that club, he was bound to play for that club
the rest of his professional career. He had no choice whatsoever to
go to play for any other team. The only way he could go to another
team is if he were traded. That was known as the reserve system and
the reserve system has existed in professional basketball for 25
years. It was changed 2 weeks ago by the owners gratuitiously.
Basketball's reserve system proved even worse than professional
baseball's, which has had a less restrictive draft, in that not only
was the player bound to a single club, but, if he declined to sign the
contract offered him yet wanted to play professional basketball, the
230
club owner could exercise successive annual options on the player's
services, each at a 25 percent reduction in pay. This lasted perpetu-
ally. It wasn't a 1 year option. So that mathematically a player could
be down to a point where he was playing for virtually nothing if he
wanted to stay in professional basketball.
Now, that was the way the system worked in the old situation
prior to 1967.
At that time the salaries of the player obviously reflected this
depressed bargaining position that they had. It is interesting to note
that one of the argmnents presented now by the owners in favor of
the merger is that they will distribute the salary structure among all
the players more equitably. They claim that by not having to pay
huge bonuses to rookies they will have more money to pay existing
players. One has only to look at the history of what existed when
there was one league to see that this was never true before and there
is no reason to believe that it will be true now,
I think it is important at this point to understand the type of
negotiations that went on. The player had nowhere else to go. He
was stuck with that team. And this would create for any employee a
very, very difficult situation, but one must understand the skill that
these players had and the creation of a very difficult position that
existed for them.
There are hundreds of thousands of high school basketball play-
ers. There are tens of thousands of college basketball players. There
are only 40 to 50 who make the professional ranks each year.
These are very highly skilled people. Their average basketball life
is T years. The maximum playing life is 12 years. A player can be
injured at any time and his career can end after 1 year or 2 years.
Obviously he has a limited time to earn his money. He has to earn it
during that few-year period or he never can.
If we look at what the salary level was and the benefits that
existed prior to the introduction of the new league, we can have a
picture of what the depressed salary level was.
There was no formal minimum salary requirement in the National
Basketball Association. jNIany players were paid $6,000 or $7,000 a
year. On one team in 1966, except for the player-coach, no player
earned over $23,000. Fifty percent of the players in the NBA were
earning under $20,000 a year. Eighty percent were earning under
$50,000. In 1967 the median for the players was $23,000.
The prime example of the depressed salary structure would be the
Boston Celtics. No team in professional sports, except for possibly
the New York Yankees in baseball, ever created a dynasty the way
the Boston Celtics did. For 11 out of 13 years they were the champi-
ons, champions of the National Basketball Association. Up until
1967 not one player on the team except for the player-coach received
a salary in excess of $45,000 a year, although that team was a
dynasty and had millions of fans watching it weekly on television,
and although during that same period of time ownership of the
franchise changed four times and every single time ownership
changed, a substantial capital gain was realized by the selling
owner.
231
In 1966 there were very, very few benefits for the players. There
was no pension plan of any significance. It provided $2,000 or $2,400
a year at age 65 and half of that was paid for by the player.
There were no medical or life insurance programs for players who
were injured and they had no benefits at all afterward.
Now, in 1967 a new league is formed and comes into existence and
really the beginning benefits of competition didn't occur until 1968.
^Vllat happened is you now have two drafts. Even though within the
structure of each league they still are monopolistic, there were two
drafts and there are two teams now that a player can think about
when he wants to sign with his existing club owner. He can go to
his club owner and say, ''If I don't get enough money from you, I
can go to the ABA." The resultant effect on salaries was dramatic.
Senator Ervix. Do you ha^e any doubt in your own mind as a re-
sult of your study of this problem that the major objective of this
demand for exemption from the antitrust laws is the ability to have
a single common draft for all of the major basketball teams so that
the basketball team can arrange a system under which a person possess-
ing basketball skill would be compelled to negotiate only with one
team ?
]Mr. Fleisher. ]\Ir. Chairman, Mr. Millstein, who is our attorney
in the antitrust case that was filed in New York, is going to discuss
the legislation from a legal aspect. There is no question in my mind
that this is so.
If you recall, many players prior to the advent of the ABA were
forced to sign at $6,000 or $7,000 a year. Today the minimum salary
is $16,500.
You will recall prior to the ABA that over one-half of the players
in the XBA were earning under $20,000 a year. Today only 10 per-
cent of the league earns under $20,000; 50 percent are earning over
$40,000.
If you will recall, the median for the players in 1967 was $20,000;
today the median is $43,000. The pension plan provided prior to the
ABA for a maximum of $2,400 a year for a 10 ^-ear veteran, half of
the cost paid by the players. Today it is $7,200 a year at age 55,
fully paid by the owners. Every player in the league today is cov-
ered by insurance policies, severance pay benefits and other items
that did not exist in 1966 and 1967.
On an individual basis, the differences are even more dramatic.
Prior to the two leagues competing, a plaj^er had nowhere to go. If
he signed with a club under the draft, the maximum he would get
would be $15,000 a year or under. Today as the testimony indicated
yesterday by Mv. Nathan, most of the 10 or 12 best players in the
country will sign for $50,000 or more.
Players who were paid $20,000 to $35,000 were able to renegotiate
contracts for 5 times that amount. Some players did it within their
own league; some players did it without.
The purpose of this testimony is to show, ISIr. Chairman, that be-
cause of the ABA and because of the competition, every player
in the NBA benefitted. It wasn't just the superstars and it wasn't
the rookies; it was everybody in the league who benefitted. The
salary structure and the benefits for every player in the league
increased.
232
Now, wliy did this competition exist and why were they willing to
pay these salaries? The men who formed the American Basketball
Association all had one overriding motive: Kather than purchase a
franchise in the NBA they felt if they could create a new league
they would someday be able to force the old league to absorb them
and then make their franchise tremendously more profitable, and the
only way they could do this was by making the ABA a strong entity
and by obtaining talent, because all basketball is is talent. There are
12 ball players on the team and that is what exists. The ABA
needed television contracts and the television networks said in order
for us to televise the games you are going to have to have better tal-
ent and what the ABA owners were trying to do was to force a
merger, force Congress to pass a merger for them, and this ^yould
then take their investment of $500,000 to $1 million and immediately
make it worth the most recent price of a new NBA franchise, $3.8
million. And, of course, the NBA at that stage was doing everything
it could to keep the ABA from coming into business. They were
therefore attempting to sign their ballplayers to higher salaries and
that is what the whole thing was about and that is why the competi-
tion forced the salaries to go up; and we don't think there is any-
thing wrong with that.
We think that is the whole idea of the way the economy is sup-
posed to be run. There is nothing that stops anybody else in the field
of our endeavors from trying to earn more money, whether he be a
professional golfer or tennis player or boxer or entertainer or busi-
ness executive or basketball team owner. They have those rights.
Now, I think it is important, Mr. Chairman, to note that it isn't
the players who have come to Congress to ask for any special treat-
ment. The players are asking now for nothing more than to have the
right to bargain fairly and to have the owners compete lawfully.
Senator Ervix. Is it correct to say that all the players are asking
for is that they enjoy the same freedom of contract which every
other American possessing either goods or skills enjoys?
Mr. Fleisher. That is absolutely correct, Mr. Chairman.
Senator Ervix. In other words, they are asking in effect that Con-
gress not destroy the free enterprise insofar as it relates to profes-
sional sports ?
Mr. Fleisher. Correct, sir.
We will have at some later date somebody testifying as to the true
economics of the ownership of a basketball team. But I think it is
important to describe in fairly general terms the nature of the bas-
ketball owner, the new basketball owner, because I think that is
very, very important to the while discussion here on the legislation.
l^^iat has happened, Mr. Chairman, is that 18 new franchises have
come into existence in the last 4 years. Now, we are not talking
about oldline, established businesses that are coming to Congress and
are saying that everything has gone wrong. We are talking about 18
new franchises in the last 4 years.
Now, who are today's owners, these men who are involved in it?
The great majority of them are very, very successful entrepreneurs
who have taken their own businesses and have sold them and have
made large amounts of money and would like to find a place to in-
233
vest that money and they find sports very glamorous and they look
at the potential growth of professional team sports and they are told
by their advisers that basketball is the sport of the 1970's and that is
the team sport that is going to grow the most.
So therefore from a business point of view basketball is a good
franchise to own. It is going to grow ; it is going to go.
They also are told that there hasn't been a basketball franchise
sold in the NBA in the last 5 years that did not result in a substan-
tial capital gain to the selling shareholder. That makes it attractive.
In addition, they are told by their tax advisers that any cash
losses that they might incur for a period of time will be offset on
their income tax return against ordinary income. But much more in-
terestingly, anything they pay for the club, minus the cost of a fran-
chise fee, can be amortized over a 5 -year period and written off
against their personal income tax returns if they treat the ownership
of the club as either (a) a partnership, (b) an individual ownership,
or (c) a subchapter corporation.
Senator Ervin. And they wouldn't even have to restore for in-
come tax purposes the skills of any of the players whose services
have been terminated prior to the time of subsequent sale of the
franchise, would they ?
Mr. Fleisher. That is correct, sir.
Now, the ow^ners after entering basketball and after reaping all
these benefits, now act as businessmen and they see themselves in
what was once a glamorous and exciting thing to be in — they look at
their franchise and say where can we increase our profits; and the
one way they can see themselves making their profits, gentlemen, is
to try to go back to the good old days of basketball before there was
any competition and to do away with the high salaries, and that is
the only reason we are here today, because a group of businessmen
have now decided they would like to get together to eliminate com-
petition; and as Mr. Millstein will testify, the owners here can not
do this legally. The courts have prohibited them from doing it.
Now, it hasn't stopped them, gentlemen; it hasn't stopped them
from doing it anyway. A court order was obtained a year ago. In
May of this year the leagues agreed to merge, in our belief totally in
violation of the preliminary injunction. These gentlemen have gotten
together and have restricted competition entirely. The court order as
Mr. Millstein will describe, says they must compete up until the time
that Congress passes a law granting them the right to merge. There
has been no competition. They couldn't wait for the Congress to ap-
prove because they were afraid it might take a while.
Not one NBA player has been signed by the ABA since May
when this agreement was entered into, even though prior to the time
it was entered into there were all sorts of statements of all-out war,
we are going to sign all of the best players; we are going to bring
them to their knees — not one has been signed.
Senator Ervin. I guess you are aware of it, but this proposed
merger agreement, provides that all of the owners must continue
to adhere together in their fight to persuade Congress to allow
them to eliminate competition by imposing upon themselves a pen-
alty of $3 million if any one of them breaks ranks. In other words.
234
the merger agreement requires them to mortgage their ideas as to
what is good for their sport and what is good for the economic wel-
fare of America, doesn't it 'I
Mr. Fleisher. Certainly.
In reality, JNIr. Chairman, knowing that more than 50 percent of
the owners have held their basketball franchises for less than 2
years, what we now see here is a totally new business in which the
entrepreneurs have immediately come to Congress to ask for special
privileges, for guarantees against failure due to their own weak-
nesses, to poor management, to lack of planning and to greed.
Now, naturally we have not been privy to many of the real eco-
nomic facts of the ownership of the clubs. But we have attempted to
piece together some information where it was available; And we
think it is important to use two specific examples because in 1967
two new franchises came into being. One was in San Diego and one
was in Seattle, and we believe that the tremendous profits resulting
from ownership of just these two franchises belie the claim that the
owners are losing money.
Now, in 1967 both new franchises paid $1.75 million to come into
the National Basketball Association. San Diego, as we understand it,
had only one principal owner. For -1 years that team stayed in exist-
ence in San Diego. During that period of time, there were two new
expansions of professional basketball in the NBA. Two new teams
came in in 1968 and three new teams came in in 1970. The San
Diego franchise received as expansion money from these new teams
almost 75 percent of their original initial investment.
Senator Ervin. I was just wondering what became of the entry
fees that were paid ; what was done with them ?
Mr. Fleisher. I am sori-y
Senator Ervin. Somebody pays an entry fee to the league ?
Mr. Fleisher. It is divided up among the remaining owners.
Senator Ervin. So that is another monopoly.
Mr. Fleisher. For 3 years the ownership of the San Diego fran-
chise claimed that they were losing enormous amounts of money.
There is now a lawsuit in San Diego involving the municipally
owned stadium's claim collection of rents, interest and taxes. I per-
sonally was involved in salary negotiations with the gentlemen who
is the owner of the franchise who told us that if he had to pay $2 a
dav more in meal monev for the plavers — there are 12 plavers, $24
times 100 days, $2,400— if he had to pay that $2,400 he would go
bankrupt.
On June 14 of this year that club was sold and it was sold to
Houston. Nobody went to the San Diego fan; nobody went to those
players who had bought homes and lived in San Diego, and said we
are now thinking of going to Houston, what is your idea of it. It
was sold. This is the club which was supposedly losing so much
money. Four years later it was sold for a profit reportedly of $4
million, on an investment of $1.7 million.
Now, the Seattle franchise which was created at the same time as
San Diego is another interesting example, because here it was done
more on a stock basis. Tavo very sophisticated businessmen were able
to buy the franchise by borrowing all the money from a bank. They
235
put up no cash. They obviously were able to take advantage of the
amortization of player contracts. They treated $1.6 million of the
$1.75 million as player contracts. That means over $320,000 a year
for 6 years had the oj)portunity of being written off. So for the first
year, with no cash investment, they could write off $320,000, on their
personal income tax returns, and we resume they did so though we
haven't seen them. They immediately then turned around and made
a public offering of this company and they raised enough money to
pay off' the bank loan. They put up a few dollars, and 1 mean very
few, for their own personal stock. They received a lot of money for
that stock and they now own a majority interest in the club, over
310,000 shares, with no investment.
We find it very difficult to believe that that is an economic depri-
vation on their part.
Senator Ervin. I believe I have seen the statement issued by those
gentlemen to their stockholders in which they tell stockholders while
on the tax returns of the team that they are sustaining a loss, that
they actually are making a profit because the loss appears to be from
amortizing the players' contracts.
Mr. Fleisher. Mr. Chairman, since 1968, in addition to Seattle
and San Diego, five new expansion franchises have been granted by
the NBA. The aggregate entry fees paid by these 7 clubs since 1968
have totaled $19.6 million, a bonanza shared equally by the existing
franchises. If Congress approves this merger, the teams of the ABA
will pay $12.5 million as their entry fee, for a grand total of $32.1
million sincel968, and it must be kept in mind that these enormous
sums have not been paid by innocent newcomers to the world of big
business but rather by sophisticated and highly successful entrepre-
neurs dedicated to further profit.
Now, Mr. Chairman, the owners have claimed as have their repre-
sentatives that the real root of their economic problem is the tremen-
dous salaries that they have to pay new rookies and I believe that
we have indicated that historically this is not true because prior to
the time that they had to pay high salaries to rookies, they didn't
pay the salaries to the existing ball players they had then. But we
made an offer to the owners. We made an offer to see if they were
really being honest with us and we offered program in which there
would be a common draft, under which a player would be tied to the
one team that drafts him for 1 year, the year he signs his contract,
and 1 year thereafter.
However, that player and every existing player must be free
thereafter to negotiate his own compensation with whatever fran-
chise he desires.
Under such a system every player would have an opportunity to
establish his true worth and true value after being tested for 2
years.
The owners turned it down and it is obvious by rejecting this offer
they are not really concerned about the high salaries being paid to
rookies ; rather, their only concern is to eliminate competition for all
salaries — rookies and veterans alike.
We believe our proposal can work. We can have witnesses and will
have witnesses describe the procedures by which this could operate.
One method, of course, would be to negotiate long-term contracts at
236
arm's length which would keep any player with one team just as
long as the employer and employee both agree to the duration of
these contracts and services.
It should be interesting to note the following quotation that ap-
peared prominently in the press in February, 1971 :
It is my feeling that sports would be better off with no reserve clauses.
There is no reason why athletes should be chattels of the owners. Every per-
former should be free to negotiate for himself as people do in other businesses.
If a guy in any sport doesn't want to play for Seattle or Los Angeles or Buf-
falo or any other team, why should he be made to do so because the owners
have decided that reserve clauses are good for the game? If all reserve clauses
were thrown out, you will find after a while that everything will level off and
no significant changes will be made.
The maker of that statement when asked what would happen to
one owner if the rich owners decided to gather up all of the talent
replied :
He would be left with a choice ; he could compete the best way he could or
get out of the sport. In other businesses of mine I sign people to contracts of
maybe one to five years. At the end of that time they are free to stay or move
elsewhere, and life goes on. It would be no different in sports.
These statements were not made by the Players Association but by
Mr. Sam Shulman, president of the Seattle Supersonics, a team in
the National Basketball Association, and a member of the league's
merger committee.
Thank you, Mr. Chairman.
Senator Ervin. In construing the 13th amendment, the Supreme
Court has declared in several cases that slavery or involuntary servi-
tude means tlie forced labor of one man for another — I will ask you
under that definition that any league which has a system which ties a
man either directly or indirectly during his playing life to one team
against his will is not compelling forced labor of that man for that
team ?
Mr. Fleisher. Well, we believe so, sir, regardless of how much the
compensation is.
Senator Ervin. Yes. In other words, it doesn't make any differ-
ence. You are in bondage regardless of whether the chains that bind
you are golden chains or some other kind of chains, aren't you ?
Senator Tunney ?
Senator Tunney. Thank you.
Mr. Fleisher, I read your statement with great interest and I want
to thank you for having spent so much time in the preparation of it.
It is very factual and I appreciate it.
I am wondering if you could tell me whether the goals and the
objectives of the NBA Players Association are the same as the ABA
Players Association, and the reason I ask that question is, you were
in the room yesterday and we had representatives of the ABA Play-
ers Association saying that they felt that the only way the sport
could be saved would be to have a merger, and, of course, the fact
that the NBA feels just the opposite makes me wonder whether or
not the goals, the objectives of both player organizations are the
same ?
Mr. Fleisher. Well, I think, Senator, that the goals of the NBA
Players Association are clear. The goals are the freedom to negotiate
237
for tlieir salaries. We truly believe that professional basketball will
continue on if the players have the right to negotiate for their sala-
ries and we look to the economic situation of the clubs and the
prices paid for them as recently as 1 year ago as evidence that there
are people who look at basketball and know it is economically via-
ble.
Now. the playei-s in the XBA have uniformly backed our position.
Every player in the NBA, and I think this is important to note,
joined in the lawsuit, voluntarily signed to join in the lawsuit, ex-
cept for one player who couldn't because he was banned to do so as
a settlement of his own antitrust suit. Everybody joined. And every
player has contributed a substantial amount of money to help fight
the m.erger. And every player understands what is involved here.
There will be a witness appearing later who is the president of the
ABA Players Association who will testify that while they agree
with the idea of a merger, thej^ want the same rights and the same
freedoms that NBA players are fighting for, the right to negotiate
freely for their salary, and any restrictions on that right the ABA
Players Association believes are wrong.
So I think basically the goals are the same.
Senator Tunxet. As I understand your testimony, you are not
opposed to a merger insofar as a merger would take place without
any reserve clauses being allowed and without any option clauses
being allowed with the exception of the one year option that would
follow the first vear of a rookie's contract ; is that a correct interpre-
tation?
Mr. Fleishee. Senator, we ofi^ered that proposal. We recognize
that we are restricting the rights of certain people by doing that.
There is no question there is a restriction because in the lawsuit we
filed we challenged the draft and the reserve clause as illegal as well
as sought to block the merger. So we are taking away certain rights
by saying that. But we believe that is a temporary restriction on the
player which will be done away with in a 2-year period; the player
is then free to negotiate from that point on.
What we are saying is that tlie legislation as introduced here
today doesn't say anj'thing to that point, doesn't cover ruy of the
points; so we are opposed to the legislation that would take away
the players' right to compete for their services.
Senator Tuxxey. Have you gone so far as to draft any language
which you feel should be an amendment to the legislation that has
been introduced today ?
jMr. Fleisher. No.
Senator Tuxxet. Plow do the players respond to the claims of
the owners that without some kind of compensation rule the rich
teams will acquire all the best talent and ruin the competition with
other teams ?
Mr. Fleisher. Well, Senator, there are primarily two responses:
The first is it has never been tried. Also, even under the existing sys-
tem, as I indicated, one team won the championship 11 out of 13
years. There is no indication whatsoever that this will change at all.
The second argument is presumably the competitive aspect of the
owners themselves who limit themselves from doing it. It doesn't
make very much sense for one man to buy up all the best ballplayers
7S-465 — 72— pt. 1 10
238
and have nobody to plaj^ with because he lias then a franchise that
is not worth any money.
The third point is one team attempted to do that in Los Angeles,
signed its three best ballplayers under a system, the existing system,
and they never won because basketball is somewhat unique, in that
several players on each team often have very little oppoitunity o
actually play. Yet these players consider this as their livelihood and
work. They are very proud of what they do. They don't want to sit
on the bench and just get paid. There is no way you are going to
keep twelve superstars happy on one team. They just won't be. So
the natural forces of competition are going to exist and the players
strongly believe that and I believe. Senator, when some of the play-
ers testify they can articulate it a little l^etter tlum I can.
Senator Tun^^et. I am just wondering if it might be worth ex-
ploring the status of the NBA Players Association under the Na-
tional Labor Relations Act. I understand that the Players
Association is covered by the National Labor Relations Act but tliat
you have not — you are not a bargaining unit under the act because
there has never been an election, certified as a bargaining agent for
the players ?
Mr. Fletsher. That is right. The owners have recognized us as a
bargaining agent and collectively bargain with us annually.
Senator Tuxxet. But you have never formally
IMr. Fleisher. Never filed, right.
Senator Tuxxet. Why not ?
Mr. Fleisher. I don't believe any particular reason; it just hasn't
been done.
Senator Tuxxey. What is the relative bargaining power between
the owners and the players ?
]Mr. Fleisher. I believe in 1967, with the advent of the ABA, we
came very close to being on equal terms. L^p until that time we had
very little bargaining rights as reflected by what our benefits were
then and what they are now.
Senator Tuxxey. Are the ABA players as well organized as the
NBxV players?
Mr. Fleisher. I think clearly not. They are a new organization.
They are subject to pressures and powers that the NBA players
aren't subject to at this time. Hopefully at some point they can
reach that position.
Senator Tuxxey. How do you mean, pressures and powers ?
Mr. Fleisher. I think without any real, direct leadership yet, and
obviously by the fact that it was only about a year ago that they got
recognition of the bargaining rights, they have gotten no benefits. I
think tliose are the pressures tliat they are worried about. There are
people talking to themi, owners, I imagine, who are telling them they
are going to go out of business and therefore they cannot get more
benefits.
^Senator Tuxxey. We had testimony yesterday from Senator
Kuchel, counsel for the owners, that the effect of this legislation
would be only to exempt the leagues and the teams from the anti-
trust laws for the purposes of the merger and for no other purpose.
Do vou concur and agree with that statement ?
239
]\Ir. Fleisher. Senator, if I may, that is why Mr. Millstein is here
vv'ho is g^oing to be our next witness and a direct portion of this tes-
timony will deal with that point.
Senator Tunney. A\^iy wouldn't you be in a strong bargaining
position after the merger and one players' association? It would
seem to me presumably at least that you have had tremendous bar-
gaining leverage.
]Mr. Fleisher. We were one i)layers' association in 1966 when it
was one league. When there is one league, sir, there is only so much
that you negotiate and bargain.
Senator Tunxey. I want to make sure that I understand what
you are saying, what you imply, by the statement.
In 1966 you did not have strong bargaining power and why didn't
you have strong
Mr. Fleisiiei?. Because tliere was not place else for a player to
turn, and where there is no place else to turn there is no power.
Senator Tunney. I see. So what you are saying is that if you
only allowed a 1-year contract for rookies with a 1-year option, and
that they were then free bargaining agents, at that point in time you
would protect their free bargaining rights in a way that they were
never protected prior to 1966 when you had just one league?
Mv. Fleisher. Correct.
Senator Tunney. How effective is a players' strike in sports'?
Mr. Fleisher. Well, there has never been one. There was a threat
of a few of them but there has never been one.
Senator Tunney. Thank you, JNIr. Chairman.
Senator Er\t:n. Senator Hart?
Senator Hart. Thank you. Perhaps ]Mr. Millstein would want to
comment on this also.
I have had the feeling that professional team sport is sort of nei-
ther fish nor fowl ; there are too many aspects of sports particularly
pertainiiig to the competitive level to permit it to be treated as a
business under the antitrust laws arid I feel that there is too much
of the element of business to be dismissed solely as a sport.
I wonder if you don't agree with that in your testimony? "Wliat
you are suggesting is a pattern of draft, player draft, a 1-vear obli-
gation with a 1-year extension. Now, that violates the antitrust laws,
doesn't it?
Mr. Fleisher. Yes, sir.
Senator Hart. Well, how do you justify
Mr. Fleisher. I admitted it at the beginning, sir.
Senator Hart. I wasn't here ; I am sorry.
JNIr. Fleisher. I feel that the only justification is that at least at
the end of that period, for the rest of a man's career, he is free.
Senator Hart. The only justification really is that it is a problem
unique to sports or at least that is the way you resolve it because of
the unique characteristic of the game.
Mr. Fleisher. I don't feel personally that the draft is a require-
ment or a system that must exist in professional sports. I don't. But
it is a concession that we are willing to make at this time, and rec-
ognizing full well that we are taking away the rights of certain
people, but I represent the players, the existing players in the NBA.
Mr. Millstein. Senator, let me just supplement by saying it is a
240
settlement. That is all tlie suggestion is. I still think that sugges-
^^""SZ^nv HvPT Let me ask ^Ir. I^Iillstein to isolate himself then
from Ms #esSi representation and approach this as an antitrust
""'T^^^^^^^^i^ -e have got a situtation here where
th^se rule^s^hS ve would apply with respect to the autombile com-
paS/in acquisition of college graduates is not gomg to wo.k
"\TMnisTEm. No, Senator, I am not in agreement. My position-
T am spelkio stri as a practitioner and a professor-is that there
Lfsome aspects of professional sports which should be permitted to
escape the antitrust laws.
iS^1SL™S-^— end to you a superb article in the
nLvard S^^^^ -^Hch analyzes this. far better than I could. 81
Harvard Law Review m which cam.e out "^ 196^
For exami^lc, scheduling and playing rules: ihe clubs iia\e to get
to^rethe! am make a schedule. They have to get together and decide
how to pkv The game should be played the same way _m Los Ange-
es wi?h the'samelize court, same height of basket, as m New Yovk
E^hc lib ought to play the other club so many times. There ought
mSl to be any favori ism. Each club ought to play so many times at
home andTo many times on the road. That requires the clubs to sit
Cn and ?each an agreement. It is clearly a restraint of trade
be<^u4 clarW each club is being restrained as to what it can do
vfsT;dso?her clubs, but it is a reasonable restraint of trade because
without such agreement there couldn't be a league.
Let's skip restrictions on players for a moment because I wil
come back to that. The reason I thumb through this, it has a good
cSloour Eestraints on owners and potential owners-m other
woids" who can enter the league. There ought to be some abi ity of
tTe ownI4 to agree on who can come in and come out ot the league
because after all, if it were possible for anyone to come into the
e^gue at^Cny tim^ from anyplace, the league night quickly dissolve
You couldn't have an organized sport if there were absolutely fiee
''''sJ'some rule of reason approach ought to be built into the situa-
tion where by the owners' agreement to decide on who can come in
and out of the league is exempted from the antitrust laws, but not
totally. There ought to be hearings; there ought to be some reasona-
ble standards set up so that the owners cannot be arbitrary mdecid-
ino- to shift a franchise from Washmgton to Dallas. Now that deci-
sion is made with no regard to the public, no regard to the interest
of the sport, no regard to the fans. It IS just made. .
Perhaps there ought to be a public representative to decide
whether a transfer is a good or bad idea. So 1 say while shifting
franchises and entry are things which the owners might decide for
tl^.emselves, perhaps the public interest and the views ot tne tans
ought to be factored into that process. ^ ^ . , ^, ^ , . . .
Those are the kind of things which I think the clubs liave^ to be
permitted to do, and in some way exempted from the antitrust laws.
241
Senator Hart. Things winch would not be permitted the steel
industry?
Mr. ]\liLLSTEix. Absolutely.
Senator Hart. So you do agree that we have something that is
neither fish nor fowl ?
^Ir. ]\liLLSTEiN. Only to an extent, to an extent.
Senator Hart. Yes. If they were all one or the other it would be
either fish fowl?
]Mr. Mii.LSTEix. That is one way to describe it, Senator.
Senator Hart. Well, that is the way I have approached organized
team sports in the yeai'S I have been here.
]Mr. MiLLSTEix. But you are a very good antitrust lawyer and I
know that from very well under the rule of reason in any business,
some things fall to the left and some things fall to the right ; so you
could say that the steel industry is neither fish nor fowl. For exam-
ple, the steel industry has trade associations. Those trade associa-
tions do things on standardization which restrain trade and limit
what those steel companies can do. Nobody would claim that all
standardization is illegal ; especially when it is done under the aegis
of the U.S. Government, standardization which doesn't work out as
pricefixing or market division, you and I both know falls on the
good side and under the rule of reason is all right.
All I am saying is that, as the antitrust laws have traditionally
been applied in any industry, there are some things you can look at
as permissible under the rule of reason, depending on the nature of
the industry, and others that fall. In this sense no industry is either
fish or fowl.
Senator Hart. Do you think any practice that you have suggested
would be such that if you were counsel to a franchise owner j^ou
could with confidence assure him he wouldn't need the legislative
protection to keep him in the clear?
]\Ir. MiLLSTEix. In terms of the lawyers ?
Senator Hart. You have talked about territorial restraint?
]\Ir. Millsteix. Oh, yes.
Senator Hart. You liave talked about limitations on entry. "\Miat
about an authority to throw a guy out once he has been in ?
Mr. jMillsteix. That has been upheld by the district court in New
York. Molinas was fired out of the basketball league for alleged
gambling; so the courts have ruled that the sport can take reasona-
ble precautions to protect its integrity and dignity.
I would counsel owners to adopt a rule like that. I would counsel
the owners that without coming to Congress they could have inte-
grated scheduling.
Senator Hart. What would you tell your client owner with respect
to the settlement proposal that you describe here, a common draft?
]\Ir. ]MiLLSTEix. I wouldn't have a problem because my question to
the owners would be a practical one, who is going to sue? All the
players would agree to it presumably. All the owners would agree to
it. There is nobody left.
Senator Hart. What about the fellow who gets drafted next year
who wasn't part of the agreement and isn't drafted or he is drafted
by somebody he doesn't like?
]Mr. Millsteix. Senator, he might sue ; I cannot say.
242
Senator Hart : What would you tell your owner?
Mr MiLLSTEiN. I would say take the risk; it is worth it. If it is
neo-otiated as part of an overall settlement. Take it, because it is a
we"v of ondin- this proceeding which is becoming terribly expensive
for both side? and sooner or later I think reason has to prevail on
botli sides and create a meetmg ground I don't thmk it js very
much of a risk and I think while Larry Fleisher is correct that the
common draft plus two years would be illegal if imposed undater-
allv, the fact that it would be negotiated and agreed to by all par-
ties as part of an overall settlement might bear onits reasonableness.
I would odvise all of my clients to take the risk of a negotiated set-
tlement in order to end the terrible expense and burden of these
proceedings and the lawsuit, and frankly I thmk we would be left
alone bv everybody with delight. ,
Senator Hart. Thank you very much, Mr. Chairman.
Senator Ervin. Senator Hruska ? . . , . . , t
Senator Hruska. Thank you, Mr. Fleisher, for your statemient. 1
ha^-e followed it with interest. There are many allegations of things
you expected do by way of adducing proof. I will await that proof
and see what substance can be lent to the proposition whicn you
^ It" i« a ^-ery complicated situation. Many interests are involved. It
is not uniaue. There are many, for example, on the question of
stadia. It is not unique for industry to use facilities whicn are fur-
nished by governmental units and they are not accused of exploita-
tion In railroad legislation, historically in our civil aeronautics and
aviation, the same thing has happened in many, many other situa-
^^So we will await some of the proofs that you will adduce for the
purpose of substantiating many of the propositions you have given.
Thank you very much for behig here. , . ., v^
Senator Ervik. I have heard all my life that the differences
between men are measured in inches, not m m.iles. Isn t that true
with respect to the athletes? In other words, for every star there is a
fellow who is almost a star, isn't there? • , i ^i n
ISlr Fleisher. I am smiling, Mv. Chairman, because m basketball,
inches could mean an awful lot between 7 foot 3 inches and 6 foot. _
You are absolutely correct, I^lr. Chairman, there is no question
about it, and the players again will testify as to the differences
bein*'' that small.
Senator Ervin. Yes, and we have a lot of differences; some differ-
ence in ability of lawyers, but to use an illustration of one who was
acknowledged to be one of the great members of the bar of the
United States, the late John W. Davis— the late Jonn \ V . Havis
sometimes lost lawsuits, didn't he?
"Slv. Fleisher. Yes, sir. i i i ^
Senator Ervin. Sometimes the best basketball teams and the best
football teams and the best baseball teams and the best hockey teams
lose games, don't they?
Mv. Fleisher. Yes, sir. . .
Senator Ervin. And so the best way to have as mucii competition
in procuring players as possible is to minimize those differences, isn't
it?
243
]\Ir. Fleisiier. Yes, sir.
Senator Ervin. Now I have the conviction that if Congress is
going to get a true financial picture of the supposed financial plight
of the owners of these clubs, we are going to have to get a complete
disclosure from the owners of those clubs including their personal
income tax returns, aren't we?
]Mr. Fleisiier. It would appear that way from this information.
Senator Ervin. In other vrords, if you take losses on basketball
operations alone and ignore the rent that is paid on the stadium
while it is owned or controlled by a separate corporation owned in
large measure by the owner of the team, and find out how he
deducts his losses and then find out when he makes a sale what his
capital gain tax is, we need all of these to get this picture, don't we ?
Mr. Fleisiier. I would believe so.
Senator Ervin. We had a very noted economist before us yesterday.
INIr. Robert Nathan, wliom I respect very highly, and I asked him tlie
question whether he was given any information or whether he has any
information as to what the sales of franchises in these leagues were,
and he had no information on that point. And it seems to me that was
like the old ancient playbill that said they were going to present the
play of Hamlet with the character of the Prince of Denmark left out.
Now, wouldn't it present the real nature of the bill to say this is a
bill to exempt professional basketball players from the American free
enterprise system ? Isn't tliat the effect of it ?
;Mr. Fleisiier. Correct, sir.
Senator Ervin. Thank you.
Senator Tunnet. INIr. Chairman, unfortunately I am going to
have to go to an executive committee markup session in another
committee. I was wondering if before I leave, however, I could get
an answer to the question that I asked earlier of ]Mr. Fleisher and
which he deferred the answer on? The question of what this legisla-
tion really does as far as an exemption from the antitrust laws in
your opinion?
Mr. Fleisher. I am going to ask Mr. jMillstein.
Mr. IMiLLSTEiN. Senators, in my prepared statement I urge Con-
gress two or three times, and do so again now, that if, horror or hor-
rors, this legislation ever does start heading toward enactment, it be
stated in words of one syllable that it has no effect on the reserve
clause or the draft, that this not be left to implication.
The reason tliat I have done that, even though I heard Senator
Kuchel yesterday state that he never meant to include these, he
doesn't mean to include these, no one means to include these, is that
you can't help but hurt us by enacting this legislation. I don't only
mean by permitting the merger ; you can't help but hurt us as far as
our claims that the draft is illegal and that the reserve clause is ille-
gal—you must hurt us unless you take explicit means to keep from
hurting us.
I understand w^iat you are thinking about is leaving us alone, let
there be a merger, but make sure you haven't affected the legality of
the draft or reserve clause. I don't think you can do it. I really
believe if you enact this legislation you are going to hurt our posi-
tion on the draft and reserve clause. 1 feel very sincerely about that.
I refer again to the same Harvard Law Eeview article! am citingr.
244
I didn't write it. The students concluded as follows with respect to
the football exemption:
The exemption statute's effect on tlie legality of the player draft in football
and in other professional sports is uncertain.
Then they go on to say, and this is the key :
It could be argued that if Congress intended to allow the creation of the
common draft, it necessarily intended that that draft thus created should be
legal once it was in operation.
Now, as I point out in my testimony, this isn't a merger bill, this
is an elimination of competition bill, they have come m here and
candidly told you that the reason they want this so-called merger is
so they can have a common draft. So lefts forget the word merger.
It is a common draft bill. They want to create a situation under
which the ABA and the NBA can conduct a common draft. ^
Now, put yourself in the position of a court looking at wnat you
have done a 'year or 2 hence. You have permitted a common draft.
How did you do that? You let the ABA and NBA get together,
having come before you and told you that the reason they were get-
ting together was to have a common draft. That is what Congress did.
No'^matter how manv times it disclaimed what it meant to do, that is
what the Congress did. It has permitted a common draft.
Now, Senator Kuchel to the contrary notwithstanding, I do not
impugn his good faith but I will guarantee you that the lawyer that
gets up in court to fight my arguments on the common draft after
this legislation goes through is going to say, "Why m the woiM did
Congress permit a common draft if it didn't mean to say it was
leo-al ? Did the Congress of the United States enact a bill permitting
a common draft which was illegal?" No, he is going to argue to the
court, "That would be an absurd result; it is perfectly obvious that
the Congress of the United States meant to legalize the common
draft by permitting it to occur; they were told it was going to
occur, and the purpose of the legislation was to permit it to occur.
AVliere would this leave me? What am I going to say? "Well, they
didn't mean it; all they meant to do was permit a merger, they
didn't really mean to touch this common draft and Your Honor will
have to presume that the Congress of the United States meant to
permit a common draft that was illegal." You give me a very, very
difficult case.
Senator Tuxxet. May I ask you this: Have you prepared any
amendments to the legislation that you want the committee to con-
sider ?
Mr. MiLLSTEix. No, sir : and the reason Mr. Fleisher and I have not
done this is that our first and foremost position is leave us alone ; let
us fight it out with the OAvners in court. Let us negotiate it out with
the owners. Somehow, someway, this thing will get resolved.
What we object to in the legislation is that the owners have come
here asking for help. Can you imagine? We are the ones who are in
the weaker bargaining position. Actually if anybody should be here
asking for help it is us. We are not. We are perfectly content to take
our chances in the frying pan of competition. We are not the least
bit concerned. We will negotiate ; we will fight ; we will litigate and
someday, someplace this will get resolved ; but we are pleading that
Congress not throw its weight on the side of the owners.
245
Again, Senator Timney, I appreciate your question and I know
how sincere you are, Believe me, I am sincere. When you pass this
legishition, if it should ever ha^ipen, you are really going to hurt my
arguments in court on the reserve clause and the draft. You have to.
I will hear that argument just the way I outlined it to you and you
are throwing another roadblock against me and my attempts to have
that reserve clause and draft declared illegal, principally the draft.
Senator Tuxxey. I believe you are very sincere in your statement.
You made it vevy clear and I think it is stated about as clearly as it
could be stated.
Mr. ^IiLLSTEix. Thank you.
Senator Tuxxey. I want to thank you for your testimony.
Mr. MiLLSTEix. I want to thank you, Mr. Chairman.
Senator Er\'ix. In other words, the players are willing to take the
same chances in the free enterprise system that lawyers and doctors
and business men take, aren't they? That is all they are asking?
]Mr. MiLLSTEix. That is all they are asking for. Senator.
Senator Ervix. You pointed out that this was not to be called a
common draft bill instead of a merger bill and I would like to point out
here just for the sake of clarity that that is exactly what appears here
from the testimony of those that are asking tliis legislation. I invite
attention to section 3 on page 4 of the merger bill. It says :
The NBA and the ABA through their merger committees promptly will sub-
mit to the current and successive sessions of Congress through the calendar
year 1973 such legislation as is reasonable.
That word is somewhat ironic — and inappropriate appropriate — well,
that world is appropriate for their purposes.
To permit the NBA and the ABA to combine their operations in an ex-
panded, single league with a common draft.
They confess wanting a common draft and not only that, but they
have got a stipulation in it that says that anyone who doesn't persist in
trying to get this is going to forfeit $3 million.
Now, you were speaking about some reasonable things. The anti-
trust lav/ — only forbids unreasonable restraints on trade.
Mr. ]MiLLSTEix'. That is correct.
Senator ER\^x. I believe you have a statement. So we will hear
you now if there are no further questions for jMr. Fleisher.
Mr. Fleisher. Mr. Chairman, may I introduce Mr. Millstein ?
Senator Ervix. One question I M'ould like to ask you gentlemen. I
would like to ask you what chance you thhik there woidd be for Con-
gress, which is composed in large measure of lawyers, to get an exemp-
tion from the antitrust laws which would empower all the xoeople who
employ all of us to fix the fees of lawyers and tell lawyers what clients
they could accept retainers from ?
Mr. MiLLSTEix. We would resist violently.
Senator Ervix. And yet this is in essence what they are asking
for in respect to athletes in basketball.
Mr. MiLLSTEix'. Correct.
Senator Ervix. You will find if such bills are introduced wliat
was sauce for the gander certainly wasn't sauce for the athletes.
Mr. MiLLSTEix. Mr. Chairman, Senators, my name is Ira M. Mill-
stein. I am a member of the lav/ firm of Weil. Gotshal and Manges
246
in New York. I have been an antitrust practitioner, representing
defendants more often than phaintiffs, since 1951 when I left the
antitrust division of the United States Department of Justice.
I am an adjunct professor of law at New York University Law
School, a member of the council of the antitrust law section of the
American Bar Association, former chairman of the antitrust section
of the New York State Bar Association. And I have written and
lectured extensively in the field. My current activities include being
chairman of the National Commission on Consumer Finance, and
secretary of the National Institute for Consumer Justice.
It has been my pleasure to serve as antitrust counsel to tlie
National Basketball Players Association for the past II/2 years.
I have submitted and prepared a statement, Mr. Chairman. I will
propose only to skip through it because you have already reached
many of the interesting portions of it. However, I would like the
entire statement placed in the record.
Senator Ervin. Let the record show the entire statement will be
printed in the body of the record at the conclusion of the remarks of
the witness.
]Mr. MiLLSTEiN. My purpose in being here today is to make it
painfully clear, I hope, that our ultimate position is, as I stated a
minute ago, to be left alone. We want to be left alone. We don't
want Congress to side with the owners in the negotiations and liti-
gation which we presently have with them.
I respectfully submit that it won't be long before the owners begin
to feel the same way. As Congress gets more deeply involved in this
problems, I have a sneaking suspicion that the owners will hope that
they had never come in the first place. But in any event, our princi-
pal desire is to be left alone. We want everyone left in the status
quo.
We want the ability to continue to litigate, to continue to negoti-
ate.
I would like to direct my testimony to why I believe that this so-
called merger bill is really "less than candid approach to the problem
by the owners. I say that indirectly they are trying to achieve a
great deal more than a merger. Directly the owners are asking you
to act solely on their behalf while ignoring the rights and legitimate
interests of the players.
Senator Tunney' asked me the question as to why I thought this
so-called merger bill would do more than legalize the merger. I hope
I have responded to that. My response is clearly that a subsequent
court mav look upon the activities of Congress, recognize that you
were presented with a common draft bill, that you approved the
common draft bill and ultimately state that Congress could not
remotely have meant to enact a law resulting in an illegal draft,
I am 'fearful of that result and I frankly don't know how you can
avoid it. And, therefore, my first position is the bill sliould be
rejected in toto.
But even assuming that Congress could make it clear somehow
that you didn't mean to do anything but permit a so-called common
draft without passing on its legality or didn't mean to do anything
with respect to the reserve clause, I still say the bill is inequitable
because the owners would be obtaining a solid congressional benefit
247
for themselves while the detriments to the players in the present
sj^stem would be ignored and indeed enhanced by Congress.
So again I ask you not to pull the owners' judicial chestnuts out
of the lire of the antitrust courtroom. That is where it is right now.
We have a lawsuit going against them that is being actively pur-
sued. It involves every single thing that the owners are talking to
you about here. It involves the so-called merger; it involves the
draft; it involves the reserve clause; it involves the entire structure
of the basketball industry.
It seems to me tliat every other industry fights, its antitrust bat-
tles out in court and basketball ought to do likewise. Secondarily, —
Senator Ervix. I might suggest, you kn.ow, that maybe tlie owners
of these teams are like Josh Billings' philosophy instead of the phi-
losophy of the law, Josh Billings had a mule and said this mule
didn't kick according to no rule whatsoever; so they bring their
complaint to Congress because Congress doesn't kick according to
rules. They don't want to be in a court where rules prevail.
Mv. INIiLLSTiiix. I will agree with that.
To fully explain my position, to place before Congress the whole
issue, pei'mit TP.e to describe briefly the legal history of the subject
matter of this hearing, namely, a request for antitrust exemption of
a so-called merger of two leagues into a consolidated league.
In painting this picture I will attempt to describe first the current
litigation from which the club owners. Senator Ervin, are trying to
escape; secondly, the reasons why two Federal judges have already
declared that they think there is enough evidence of illegality here
to grant a temporary restraining order and then a preliminary
injunction; and, third, the reasons why the owners' legislation
doesn't even begin to cure the anticompetitive effects that are inher-
ent in the basketball structure today.
As this distinguishsd committee is no doubt aware, professional
basketball has been the subject of a good deal of antitrust litigation
in recent years — league against league, club against club and clubs
against single players or vice versa.
In April 1970, this type of litigation took a new turn. For the
first time in the history of professional basketball, or of any profes-
sional sport for that matter, all the players in a league — the NBA
players — brought an action against all their club owners. Parentheti-
cally let me state the existence of such a lawsuit by all the players,
for no one player's special interest, throwing the entire structure of
the business into the antitrust arena, completely distinguishes the
basketball situation from what liappened in football at the time the
football owners obtained Congressional permission to merge. I think
everyone in Congress knows that at the time the football people
came in for their legislation, there was no organized opposition. The
players were not here; they weren't organized to be here. There was
no litigation ; there was nothing going on. So the football issue, I
think, is totally irrelevant because no one came to raise the issues
that we are raising here nor was there a pending lawsuit.
The reason for the basketball players' lawsuit was very simple —
by attempting to merge two rival leagues, all the club owners and
the two leagues were conspiring and combining to eliminate compe-
tition for the services of all these players and all future professional
248
players. This attempt was to be tlie final step in a scheme to totally
monopolize the market of professional basketball.
Mr Fleisher has gone into much detail why that happened and 1
won't repeat it. I think it is perfectly clear that whereas before
there would have been two teams bidding for a player, now there
would be one if such a merger took place and there would be, as the
owners wish, a common draft and no further competition for a play-
er's services. «. i * i:. a j
Now, when competition came through the advent ot the A13A and
NBA, what did both leagues do about it? They did what business-
men sometimes attempt to do in the face of honest competition, they
sought to rationalize it. There is nothing unique about what the
owners are doing. This is a nice healthy, normal American tendency.
If you are faced with what you deem difficult competition you seek
to rationalize it. Politely, this means eliminate it. How do they pro-
posed to eliminate competition here? Very simply, all they had to
do was return to Mr. Fleisher's good old days of basketball : merge
the two leagues into one, put back a common draft, re-establish a
reserve clause and we are back where we were before — one league, no
competition for services.
At the outset, then, Senator Ervin, I contend that your characteri-
zation of this legislation is absolutely correct; it is nothing less than
an agreement among businessmen to eliminate competition among
themselves in the acquisition of a raw material— talent— used m
their respective businesses — basketball. And if you look at it that
way, mimelv. a group of businessmen getting together to eliminate
competition in the acquisition of a raw material which they use up
in their business, to me it is incredible to attempt to argue that that
is not illegal. It is patheticallv illegal and illegal per se.
Senator Hart. Mr. Chairman, would you yield there? How are
you going to advise that owner-client that I suggested someday
might be in the office that any kind of draft is other than patently
illegal ?
]\[r. MiLLSTEix. I can't. Senator: all I can do is say that
Senator Hart. If sports require some kind of player selection,
then sports require some kind of explicit antitrust exemption.
]Mr. MiLLSTEiN. I don't think they require this, Senator.
Senator Hart. Well, that is another problem.
Mr. INIiLLSTEix. No. because the difference between us has been
that I don't think it is required and if you want my opinion, I
really don't believe you need a draft and I really don't believe you
need a reserve clause. I am trving to settle a case.
Senator Hart. Not to debate that which is a separate issue
entirelv ....-, , i •-, .
Mr. '^^Iillstein. I think standing alone it is illegal when unilater-
ally imposed. I don't want to be misunderstood. I do not withdraw
from that position. It is totally per se illegal.
Senator Hart. The rule of reason does not apply?
Mr. MiLLSTEiN. No, sir.
Senator Hart. And in consultation
Mr. MiLLSTEiN. Does not apply.
249
Senator Hart. With the assumed owner-client that I suggest some-
day YOU couldn't talk to him about the rule of reason, the fact that
nobody would sue ?
Mr. jSIillstein. No. The best I could say is take a calculated risk
if you want to because there is no one around to sue; and a negoti-
ated overall settlement might bear on its reasonableness; but as I
have advised Mr. Fleisher, it is standing alone still illegal. It is per
se illegal standing alone because it is a pure division of markets and
agreement among competitors as to the acquisition of a raw material
and the Supreme Court of the United States has categorically ruled
it to be illegal, it would be less than candid with you
Senator Hart. That is whether it is two leagues or one ?
Mr. MiLLSTEix. That is whether there are two leagues or one
league ; any such agreement is illegal.
Senator Ervix. I will ask if any group of men get together and
enter into an agreement or a combination whereby they say we are
the only people in the market for these athletic skills and going to
deny the athlete by our agreement the right to sell his skill to the
highest bidder among us, by agreement under Avhich only one of us
is to offer him a contract and the others are to abstain from so doing
and by which he is going to be denied his right to engage in this
sport unless he accepts the offer from one person, can anything be
more clearly an unreasonable restraint of trade and violation of the
first section of the Sherman Act ?
Mr. MiLLSTETX. Senator, I believe not, and I would cite, to sup-
port your position and to indicate to Senator Hart exactly what I
mean, two Supreme Court cases which are very clearly in point:
MandeviUe Island Farms and the American Tobacco case. Mande-
ville Island Fa/rms is almost a classic. There a group of sugar
growers in California found themselves in the following position:
They went to m.arket to sell their sugar and they found that the
processors had agreed with each other before coming to market not
to bid against each other for the sugar. They simply divided up the
growers, then said you take that one, you take this one, and we will
not compete with one anotlier to acquire that sugar — an arrangement
held illegal per se by the Supreme Court, in an action bv a private
party.
The tobacco case, which is a classic, wound up in the Anti-trust
Division — a case in which the producers of cigarettes got together
and went to the traditional tobacco auctions which were held in
North Carolina and other places and agreed before they walked into
the auctions who would bid for which lot, what they would pay for
those lots and in general how they would divide up' what was iDeing
auctioned off.
Now, that meant there was no auction. There could be no auction
because the people who were going to do the buying had agreed
before they went into that room that they were not going to compete
with one another to acquire lots of tobacco.
Now, I hate to analogize basketball players to lots of tobacco or
sugar but that is precisely what is happening here.
Senator Ervix. But this bill if it passed would make quite a dis-
tinction in the legal rights and the freedoms of athletes and the
owners of piles of tobacco ; the owners of the piles of tobacco would
250
be restricted from doing things with respect to their tobacco that the
owners of the leagues would be permitted to impose upon human
beings, wouldn't they ? i i ^ ^^
^[?. I^IiLLSTEiN. Exactly. And, Senator, I wonder what you all
would do if the tobacco companies came m here and said we are
faced with ruinous competition ; we are losing money ; people aren t
smokino- cio-arettes the wav they used to before; we are paying too
much fov tobacco; please do us a favor— and rationalize this entire
situation. I suppose the sugar— excuse me, did I put my loot m it «
Have thev been here. Senator ? _ , n ^
Senator Hart. The owners of professional basketball teams are
not the first to appear before this committee asking for anti-trust
exemption. It is something that is in courts and indeed as recently
as the so-called failing newspapers, they persuaded this committee,
without filing very mucli financial data, either.
Senator Ervin. In all ages some groups of people have been
trying to put other people under economic bondage to them.
Mv. ]MiLLSTEiN. I agree. . -, i • i j i
Senator Ervin. So that is the reason they invented this old adage
that eternal vigilance is the price of liberty, and if you don t watcn
out Congress will pass a law to put some people under economic
bondage 'to others and that is this proposal.
Senator Hruska. Will the chairman yield? .
Hasn't that been done in every multimillion labor situation
already ^^ Under the construction that the chairman seeks to impose
upon tliis situation we should frown upon the exemption given to
the labor unions. Senator Hart suggests that without the draft it
would ]3e very difficult if not impossible to pursue and to maintain
organized sport, <« ^i a ^^
Senator Ervin. Yes, sir, and I stood on the floor of the Senate
and I fought against the labor unions, appeal of 14(b). ol the i alt-
Hartley Act to keep the labor unions from putting people under
subiection and requiring them to pay dues to them.
Senator Hruska. I am getting to that, :Mr. Chairman, u I may be
permitted to make my point.
Senator Ervin. Excuse me. , .-^ . i
Senator Hruska. Without the exemption from the antitrust laws
there could not be labor orcranization that would be effective. Ihev
are exempted and their position is very similar to the situation with
the union of players in basketball leagues. -, ., . •
Now, it is said we want to be free agents, lesterday that issue
came up. I should like to know where are free agents m America ^
Are they the 20 million labor union members? Are they free agents^
They are not by any means. It cannot be said if a man is measured
by inches, not by miles, that all welders are equal and proficient and
equally talented, yet they are paid the same. They have no free
agency; they are paid the same; and they are deprived of their tree
agency. No question about it. . . ^i i
Now, of course, if this bill is passed it will be counter to the law-
suit that you are maintaining and that you are prosecuting, Mr.
Millstein. Of course, it would. And the same thing is true m regard
to the free agency and the position taken by some people with refer-
251
eiice to labor unions way back there in 1913 when exemption was
granted to Labor unions.
So the question is a policy question; it is a policy question so we
can get as legalistic as we want to about it. It is a policy question.
Can this type of organized sport be successfully followed without
this bill or without something of this nature which will relieve the
situation and which points to the proposition which the Senator
from Michigan has several times declared already? Can they get
them without it ?
Xow, you are willing to take a calculated risk; that is all right,
but there are others who staked money on it.
Mr. MiLLSTEiN. And made money.
Senator Hruska. And made money, and without that money the
players wouldn't have a chance; they wouldn't have a chance to
negotiate for anything that is worthwhile and stable, nothing that
can follow through. It seems to me that is what the issue is and I
find myself in harmony with the logic presented by the other situa-
tions described by the Senator from Michigan.
Senator Ervin. Well, I would say that there is about as much
similarity between this proposal and the man who works as a welder
as there is between the flowers that bloom in the spring, tra la, and
the night shirt of the Emperor of Japan.
A man who works as a welder is not a slave tied to a particular
employer. He can leave that employer anytime and not be denied his
right to practice the trade of a welder. He can go to any person in
the United States and sell his skill as a welder to that person for a
price which he or his representative can negotiate. If the people who
employ welders would get together and do what these owners of these
basketball teams seek to do, that is, agree that only one of them would
oifer a job to that welder, and if that welder wouldn't take that job,
at that price, he couldn't practice the trade of welding and none of the
rest of them would employ him, that he would be blacklisted and denied
employment; that would violate the antitrust laws. Furthermore, if
the people who employ welders all got together and said this fellow
wants to enter the trade of a welder and only one of us will offer him
a job and the rest of us agree not to offer him a job, that would also
violate the antitrust laws, and that is precisely what the owners of
these basketball teams ask Congress to make legal on their part, some-
thing which Congress prohibits in other commerce.
Senator Hruska. But the law
Senator Ervi]s-. And the Failing Newspapers Act didn't accomplish
the destruction of competition. Competition was already destroyed
and all it did Avas to allow them to make certain agreements to trv to
encourage competition by allowing two of them to get together and
use such tilings as the same printing press. So there^is no similaritv.
Senator Hruska. Well
Senator Hart. Will the chairman yield just a second on that?
Some of those failing newspapers constituted part of the Knight
and Scripps-Howard, Hearst, Newhouse chains. We didn't worry
about that, or at least not all of us.
Senator Ervin. But there wasn't a single syllable in the Failing
Newspapers Act which put in any restriction on the right of type-
252
setters, editors, newspaper reporters to bargain for tlie highest price
they could obtain for their skills, and that makes a distiriction as I
repeat again between this bill and the Failing Newspapers Act as
wide as the gulf which yawns between Lazarus and Abraham's
bosom and dives in hell.
Senator Hruska. It is ti'ue that a welder can go anyplace in the
United States and find employment maybe. But wherever he goes he
is going to encounter a labor union that is going to be there saying
3' ou cannot bargain for the wages that you think you are entitled to ;
you are going to get so much per hour and that is all. That is all.
And it is not a matter that employers cannot band together and
desire to hire him or not hire him or agree they won't pay more
than so much. The vice of it here is a labor union organization that
is allowed to do that. They say how much he can earn and he cannot
bargain with his employer and say you pay me more because I am a
better welder.
Senator Ervin. Seven or eight-tenths of the people of the United
States are not unionized and the employment in which they work is
not unionized, so the union hasn't got C{uite as much power as the
Senator from Nebraska thinks. They have got too much, I think.
Senator Hruska. Well, maybe not, but there it is and there is an
exemption. There is an exemption and it was given for a purpose. It
was given for a purpose.
Senator Ervin. It was given because you liad a politically power-
ful group that demanded it just like you liave a politically powerful
group here demanding the curtailment of the protection of the anti-
trust laws for athletes.
Every infringement of American liberty has been done by Con-
gress. Everything the Congress has been engaged in has been done
at the interest of a politically powerful group.
Senator Hart. I would agree with that.
(Laughter.)
Senator Hruska, And so would I. Some people call it government
by representation; some people call it rule of the majoi-ity; other
people say there are powerful political influences.
Senator Ervix, I believe somebody ought to fight for the ones
that don't belong to politically powerful groups so there might be
some fairness left in this land and I propose to do so.
Senator Hruska. I have an idea the fans fall in that class and I
think they would like to see a situation where you find a quality of
ba5ketba,ll and a stability and a competition and a balance that will
really give the sport those things, those attributes for which they
pay when they buy a ticket.
Mr. jSIillrteix. Can I raise a question ?
Senator ER^•IX. Perhaps we had better let the witness proceed.
Mr. MiLLSTEiN. No; I enjoyed this. I didn't realize basketball was
being elevated to the position of labor union exemptions, and the
like.
Let me just say that I think what the colloquy has indicated, at
least to me, is that we are indeed talking about special interest legis-
lation. ^
Senator Hruska. Exactly.
2o3
Mi\ ]MiLLSTEiN. And we are obviously here talking about a very
small group of people coming in and saying "protect me from the
antitrust laws." At least we have identified that. And for this I am
thankful.
This is very special interest legislation. I personally, Senator, could
not agree that the importance of basketball owners can be equated
with the social history that went into the entire labor union move-
ment. I don't equate the two. And my ovv'n feeling is that I would
like to drop the subject simply by saying it is special legislation.
Let's get on and see what is to be done about it.
Senator Hruska. Well, of course, Mr. Chairman, we all are guilty
of special interest advocacy. Mr. jNIillstein is a special advocate. He
has advocated a certain course of conduct with reference to statutes
on tlie books. Those of us who sponsor this bill and want to see it
enacted feel that as a matter of general policy it would be well to
carve out an exception here to serve whom, the basketball players
only, the management only, the ownerships only? Not at all. As a
general proposition overall including the fans and public, including
the players and the management. You see, that is where we are. We
are all special interests ; some are more special than others and some
are more general than others; but it must be said that the interests
that you represent in that lawsuit is confined to the players.
jMr. MiLLSTEiN. Let me say this: I will take the argument on
those terms if then there is to be special interest legislation which is
to benefit everyone.
Senator Hruska. Yes, sir.
jSIr. MiLLSTEiN. Everyone. This isn't it, is it? Then we would need
some kind of legislation to create some sort of su}3erstructure to take
everybody's interests into account. If you are going to pass legisla-
tion giving the owners the merger which eliminates competition
between them, we urge you to pass some legislation that protects us
from them once they become monopolistic again. That is all I am
saying.
I am saying I would rather be left alone. If you are not going to
leave us alone and if there must be special interest legislation for
basketball, then it really ought to be legislation which is good for
everybody, the fans, the owners, the basketball players, everyone else
connected — ■ —
_ Senator Hruska. That is what we believe we have in this legisla-
tion.
Mr. MiLLSTEix. A bill which does nothing but permit these people
to eliminate competition among themselves, that is
Senator Hruska. That is your interpretation.
Mr. MillsteijSt. Well, Senator, what else
Senator Hruska. That is your description.
Mr. Millstein. Wliat else does it do ?
Senator Hruska. Saying this doesn't make it so. That is why we
have these hearings.
Mr. MiLLSTEiN. Senator, they said so. I didn't say so. That is
what the preamble to their contract says.
Senator Hruska. They say they are doing certain things to be
sure but these things are done and we say these things are done in
78-4G5— 72— pt. 1 17
254
tlie <rerieral interest and for the general balance. We dispute you ; we
dispute your disputation.
]\Ir. ]NIiLLSTEiN. Senator, we have an honest disagreenient but I
certainly hope those who read the bill and legislative history and
what the owners have said make it perfectly clear that they have no
confusion. I am sure if Senator Kuchel came back here he would be
the first one to admit that all he is doing here is eliminating compe-
tition in the acquisition of these players. That is all. That is good for
them. I don't deny. They are going to get richer as a result of that.
All I am asking you to do is take us into account. What about us?
What about the players facing a monolithic organization again?
Sliould there be no consideration given to their rights under these
circumstances ?
I urge that what you have before you is one-sided legislation. I
am not saying that there should never'^be any legislation, although I
hope there isn't. But if there is going to be, make it two-sided or
tri-sided. Factor in the interests of everybody involved in basketball.
That is really what we are asking for.
Now, Senator Hart, I would like to respond to one question that
you raised. I know Senator Kuchel has raised the issue of the lack
of clarity that surrounds the w^hole position of sports under the
antitrust laws.
Last night when I was reviewing the cases to come here this
morning, I ran across the Hayivood case out in California decided in
1971. That is an interesting basketball case involving Spencer Hay-
wood. Interestingly enough, it involved one owner fighting with the
league. In this case, the owner of the Seattle Sonics had signed
Spencer Haywood. Spencer Haywood was still under the 4-year ban,
under which, as INIr. Fleisher described, a player cannot play basket-
ball at all until 4 years after he gets out of high school, and that is
true whether he goes to college or not — the so-called no-tampering-
with-college-players rule.
Frankly, ]Mr. Fleisher and I had always thought there was some
salutary effect in that rule because it did keep the owners away from
the college players and we thought that was a pretty good idea; so
we have always tiptoed around that and not made any allegations
concerning it.
However, when the Seattle Sonics acquired ISIr. Haywood and vio-
lated the rule, the 4-year rule, they were immediately told by the
NBA not to use Mr. Haywood's services for the remainder of the 4
3^ears. ]\Ir. Haywood and the Seattle Sonics counterclaimed against
the NBA and sought an injunction preventing the NBA from
enforcing this rule.
Why ? Because the 4-year rule was alleged to be an illegal boycott
by the Seattle Sonics and jMr. Haywood, both, and constituted an
agreement among the owners not to deal with a player for 4 years.
AVell, again, that that is a boycott is perfectly clear. However, at
that point the case w^ent up quickly to the Supreme Court of the
United States and whom do we find arguing, I discovered last night,
in the Supreme Court of the United States, but Thomas Kuchel.
And what is Thomas Kuchel arguing for? He is arguing for the
position that the 4-year rule is illegal per se. Mr. Justice Douglas,
who heard the petition for the stay characterized petitioner's posi-
255
tion, and accordingly Senator Kuchel's position: "Petitioner then
commenced this antitrust action against the NBA. He alleges the
conduct of the NBA is a group boycott of himself and that under
(certain cases) it is a per se violation of the antitrust laws."
The lower court had granted the injunction. The Supreme Court
agreed with the lower court's injunction and permitted it to stand.
So the NBA was enjoined from preventing Haywood from play-
ing with the Seattle Sonics. All the courts, the district, the circuit
and the Supreme Court, all believed that there was a reasonable
probability of success that the 4-year rule would be declared illegal
and Senator Kuchel is the one who supported that position in the
Supreme Court of the United States.
Now, if the 4-year rule is illegal per se, wdiat is to be said about
the draft and the reserve clause ? So apparently Senator Kuchel and
I are in total agreement as to the clarity of the application of anti-
trust laws to basketball. If that rule is per se illegal, then a fortiori
the draft and the reserve clause must be.
Senator Hart. I think I have never perhaps publicly expressed
opinion about the legality of the draft. I have a very strong opinion.
But to pick up a theme Senator Hruska was expressing, if you
believe that the no tampering w^ith the undergraduate is a desirable
thing, then the only way that organized team sports can prevent
tampering is to get an antitrust exemption, right ?
j\Ir. MiLLSTEiN. Senator
Senator Hart. Now, would that be special legislation? Wouln't
that be in the public interest?
Mr. jNIillstein. Senator, if you think it is, you know
Senator Hart. I thought you said you rather thought it was ?
Mr. MiLLSTEiN. I say it is my second position. I am saying first —
Senator Hart. I am talking about the no tampering thing.
Mr. MiLLSTEiN. If they needed an antitrust exemption for that?
Yes.
Senator Hart. Would it be appropriate ?
Mv. ]\IiLLSTEiN. Would it be appropriate? Yes, I think so, but I
don't think you need an antitrust exemption. Remember that is your
l)osition, not mine. I would take the position that I think I could
defend that under the rule of reason. My point
Senator Hart. Notwithstanding thatcase ?
ISIr. ]\IiLLSTEiN. Notwithstanding — yes. We didn't intervene in
that case. We thought about it. We did not. I pointed to that case
only to show that Senator Kuchel is more violent on this subject
than I am. He goes further. The players refused to intervene. Sena-
tor Hart. We thought about it and we didn't do it.
Senator Hart. Well, what does the case hold, then ?
Mr. JMiLLSTEix. The case doesn't really hold anything other than
that Senator Kuchel argued that the four-year role was illegal per
se. It never came to a holding because when the two leagues decided
to merge they settled it secretly. I still don't know who paid what
for what but I know the case was settled secretly some months ago.
I just don't know how. They made sure that it never went any
further than that.
I cite it only for the propositon that Senator Kuchel understood
the law then a lot better than he did yesterday. A few months ago
256
he had no trouble armiincr this in tlie Supreme Court of the United
States Aijain, to be clearri don^t agree with him. I thmk tliat under
the rule of reason we could have sustained the 4-year rule it we
wanted to. This is the difference you and I have and I hope 1 am
beino- clear; the ditl;erence is that in any industry, when you test
that industry and what it does by the rule of reason, some things
fall here and some there. ^ ■ ^ £
Senator Hart. But those undergraduates are the raw material ot
the game and you say this is per se offensive ?
My. Millstoix. No.
Senator Hart. Talking about sugar . . ,
Mr. MiLLSTEix. No ; I think that —I can make a distinction there,
too, taking auctions-
Senator Hart. I am just thinking now again of the kind of coun-
sel where a lawyer of a given own'er given the set of circumstances
vv'e have discussed.
]SIr. ^IiLLSTEiN. But, Senator, you and I both know that the anti-
trust laws are highly complex and you must look at all the facts and
lookino- at all facts "my conclusion would be that I could sustain the
4-year''rule as reasonable and with the same approach take the posi-
tion that the draft was totally illegal.
Senator Hart. I am sure you could.
Mr. MiLLSTEix. And I think the courts would sustain us. Remem-
ber
Senator Hart. That is the
Mr. iMiLLSTEix. But two judges of the federal court in New York,
as I pointed out, had no trouble. As soon as we described the situa-
tion to them and explained to them tliat the purpose of the merger
was to eliminate competition in the acquisition of talent by return-
ing to a single draft. Judge MacjSIahon and Judge Tenney both
immediately ruled from the bench that an injunction should be
granted.
Senator, I think it is sort of like the Emperors clothes; iiobody
said they were walking naked, but they were walking naked just the
same.
Senator Hart. I have never had any doubt of the status of the
draft in the antitrust
]Mr. ]MiLLSTEiN. The only-
Senator Hart. I agree from an antitrust standpoint it is without
effect but I am suggesting the policy question may persuade Con-
gress to make exemption.
jSIr. IMiLLSTEix. Then I answer you. Senator Hart, precisely as I
did Senator Hruska, which is that 'if you really feel that way, and I
don't contest tlie feelings of a U.S. Senator, then legislate the whole
area; don't do it in i:>ieces.
Senator Hart. Well, in 1965 we were trying to. You would quar-
rel, I think, with the bill that the Senate passed in 1965 which runs
as follows: Organized team sports are subject to the antitrust laws.
That brings baseball — puts them on a parity with the other teams,
provided, however, that the following activities are excluded from
this coverage, and it goes to player selection, territorial exclusivity
and what would in any industry be the arbitrary power of a czar or
commission. You wouldn't buy that but you might say we will add
2,57
to that some board or third party to measure the reasonableness of
the actions taken in the exckided areas.
Mr. ]\IiLLSTEiN. Mr. Fleisher?
Mr. Fleisher. I am only concerned about the then ability ot the
player to negotiate and I
Senator Hart. It inhibits him. It does.
]\Ir. MiLLSTEiN. But vSenator. there has been more water over the
dam since 1965. We, the basketball players, have brought out a lot
of the problems and laid them on the table which is all we are
trying to do todav. Curt Flood brought out a lot of the problems m
baseball and laid them on the table. You have had 4 years of experi-
ence with football, having granted them the exemption. There is no
competition for players services in football. It is too bad but that is
the way it wound up. So you have a test tube and pilot case in foot-
ball, you have the developments in basketball and baseball to look
at. ^ . .
I really believe that Congress could take a much more sophisti-
cated look at sports in 1971 than it did in 1965. There are many
suggestions abroad as to how to run a draft. Baseball itself does not
have a complete draft any more. It is not a locked up draft. If the
player in baseball cannot negotiate his deal with the club that drafts
him, in six months he goes back into the pool again. Now he has
really got some negotiating ability because he knows and the club
knows,"that if he does not close his deal with the club who drafts
him, then he goes back into the pool.
That is a big change. So there is something new to consider.
There are other things to consider. Did the forced trade concept in
football in connection with the reserve clause work? Does anybody
move from one team to another ? No, they do not. But Congress can
now look at that and say, well, this forced trade idea — which inci-
dentally, the owner are giving us as a solution in basketball — does
not work. Why should we take it? We know it does not work. We
have seen it in football. This arbitration panel they have set up for
us in basketball as part of the so-called merger offer, will not work.
It did not work in football, why should it work for us?
These are all things that Congress knows in 1971 that it did not
really focus on in 1965, so that if you were to go back to the con-
cept, which we hope you do not, but if you do go back to a concept
of a sports commission and sports law and really handle it, then you
had better bring everybody in here and ask football how the merger
works out for the players, let alone the owners. You want to know
that. How has it worked out for the fans? What happens in base-
Ijall? All you liave to do is read the Washington Post. What has
happened in basketball? Get all the facts and see if possibly there
are not better courses to vector than the ones you did in 1965, but do
it all. Just do not do this tiny little piece the owners are asking for
and that is the summary of my testimony.
Senator Hruska. Would the Senator yield? "When you bring up
football, you say here is a test tube and we know it does not work. I
would wager a modest wager if I were a betting man, that O. J.
Simpson thinks it is a pretty successful system, does he not ? What it
is, around a million dollars he sets?
258
]Mr. Fleisher. Senator, if I may answer that, I believe as one of
tlie points that I brought out in my prepared statement the Football
Players Association is going to testify for us here
Senator Hruska. Yes; sure.
Mr. Fleisher (continuing.) Describing how it does not work.
Senator Hruska. Are they going to object to Simpson gettmg a
million dollars?
:Mr. Fleisher. Without knowing ;Mr. Simpson's case, I do not
know.
Senator Hruska. He is getting dollars. Whatever form it takes,
he is getting dollars, Now, are they going to object to Simpson get-
ting a million dollars?
Mr. Fleisher. I think it would be up to the Players Association
to discuss ]Mr. Simpson's salarv but thev are
Senator Hruska. And Koiifax is getting $125,000 a year. That is
pretty good wages. So, when they come in I would like to ask them
which part of those high salaries'and high pay they are objecting to.
Mr. Fleisher. I think they would be willing to answer that.
Senator Hruska. We will ask them.
Senator Erwn. I am used to practicing law. There is a great deal
of difference between what I got for practicing law and what John
W. Davis got and I think there are a lot more lawyers in my group
than Davis's group.
Do you know anything alwut ISIr. Simpson's financial arrange-
ments,' whether he g'ets this million dollars all down at one time or
gets it over a period of years?
]Mr. Fleisher. jNIr. Cliairman, I do not know anything about his
compensation at all. I only represent basketball players but I do
believe "Sir. Simpson does "not get a million dollars. I think there
will be testimony to discuss that if it is required.
Senator Ervi'n. Although they are going to pay a player over a
5-year period, all lumped under and the inference is left that this is
what he gets right now at one time for one year's playing.
Senator Hruska. If the chairman would yield, I did not mean to
imply it was an annual salary. He was getting money and he would
not want it annually because Uncle Sam would take most of it, so he
resorts to a provision of the law just like the owners resort to provi-
sions in the Internal Revenue Service law and he spreads it out like
they do. They are not evading tax. They are spreading them out,
which is perfectly legitimate.
Senator 'Ervin. Sure, but he is getting paid by the year instead of
all one lump sum.
Senator Hruska. That is right.
Senator Ervix. It seems to me this is a peculiar situation. As I
understand the due process clause of the fifth amendment, which is
applicable to the Federal Government, and the due process clause of
the 14th amendment, which is applicable to the State government,
the liberty which is guaranteed there as against government is the
liberty to pursue any lawful occupation, and the Supreme Court has
held that neither Congress nor State can pass a law which bars an
individual from pursuing any lawful occupation.
Is that not your understanding of the decision ?
Mr. Millstein. Yes.
259
Senator Ervin. But in this field, individuals have more power
than the Federal Government and in the absence of the antitrust
laws, individuals can get together and they can put limitations on
the right of a man to pursue a lawful occupation, and that was the
reason the antitrust law was passed, to prevent that from being
done.
Mr. jNIillsteix. One of the objects, yes.
Senator Ervin. Now, I would like to ask you this question. I have
a conviction that before Congress ought to legislate in this held it
ought to get the entire financial pictui-e of the plight of the owners
of these clubs since they are basing their whole case upon the theory
that Congress should authorize them to infringe the personal liberty
of athletes on the ground of necessit}' and inasmuch as these clubs
have changed franchises, so frequently, and inasmuch as the capital
gains made by an individual whose interest in the franchise is sold
would appear in his personal income tax returns only, and not in the
club's financial i-epoits, and inasmuch as any interest he might have or
income derived from some concession in which he has an interest under
a different corporate name or different partnership name, and inas-
much as the rent Avhicli might be paid to an organization which owns
the facilities paying personal income tax returns, I take the position
that to get the entire picture, Congress sliould have all of tlie tax
returns of all of (he owners and the principal stockholders to see just
exactly Avhether that claim that they are voluntarily engaged in a
losing enterprise is viable.
Do 3'ou not think that is true ?
Mr. MiLLSTEiN. I think clearly it is required. Special interest leg-
islation puts the burden on those who are requesting it.
Senator Ervix. In other words, do you not agree with me when
any group of businessmen come before the Congress and ask the
Congress to put other people under some economic bondage to them
and deprive these other people of absolute freedom of contract, that
there is a very substantial burden resting upon those people to make
a clean disclosure of any basis on which they base a claim that that
is necessary for their survival ?
Mt. Mtllstetx. We agree. Senator. I have just one last point to
make which is really not the subject of wliat the legislation ouffht to
be or ought not to be but it is very closely tied to what the Chair-
man just raised, and that is the question about the burden that is on
those seeking this legislation.
It seems to me that one of the things that ought to be factored
into your judgment is the good faith of these people because one of
the arguments they are making is that if this legislation passes, do
not worry about it, every thing will work out OK. The owner say,
we will work something on the reserve clause and we will work out
something on the draft and Ave will take care of things. You fellows
stay away from that, we will handle that. Just let us merge.
Xow, I think that is a claim that they will proceed in good faith
from here to deal with us. I would like to submit to you a few ele-
ments concerning their good faith for you to consider. I do not want
to make any accusations because I think the record is clear. I think
you must make your own judgments.
260
First of all, let us take a look at Judge Tenney's order, the pre-
liminary injunction we obtained in May 1970. I believe it is entirely
possible^ that that order has already been violated by the owners and
quite deliberately. The preamble to the plan of merger presented to
you by the club owners describes only one aspect of that order,
namely, that the leagues were enjoined from effectuating a merger,
but tlie preable neglects to tell Congress that several other activities
were also expressly barred by the order. They are activities which I
think the league has already midertaken.
First of all, paragraph 1(a) of the order expressly prohibits not
only the effectuation of a merger but also, and I quote, "any agree-
ment" on a merger, and the court was very clear about this. Yet the
plan of merger before you is precisely such a formal agreement.
They have reached agreement on the merger. This is no proposal.
This is an agreement to merge. This is quite important because in
granting the preliminary injunction against the merger. Judge Ten-
ney ruled that the leagues could develop a proposal to come to Con-
gress and seek an exemption but should not enter into a formal
signed agreement, and that is in the transcript as quoted in my writ-
ten testimony.
Indeed, the clubs in open court assured the court that no such
agreement was contemplated or desired, and yet you have before you
a formal agreement to merge.
I say that merely by presenting Congress with a signed agreement
dated 'May 7, 197i, which incidentally, only recently fell into our
hands, the owners appear to me to have violated the court's order.
But even more importantly, the substance of the agreement is in vio-
lation of the order because the agreement is in operation today. It is
not merely prospective or contingent on the grant of the enabling
legislation sought by the owners. These presently effective promises
between rival leagues not to compete, and I think they have already
agreed not to compete, starting ]May 7, 1971, include an agreement
that there will be no player transactions between the leagues from
now until a year after the merger.
Now, I have cited paragraph 5(c). I urge you to look at para-
graphs 5(g) and 5(1) of the merger agreement. From those two par-
agraphs you can spell out a clear statement that there will be no
player transactions between the clubs from the date of the agree-
ment until a year after the merger. And indeed, the clubs seem to be
living up to their word because there have been no player transac-
tions between the clubs of the two leagues since May 7, 1971.
Furthermore, there was an agreement for the sudden termination
of bitter litigation between the leagues. Again, that has been effectu-
ated. So, they have put into effect tlie termination of their litigation.
The ABA was suing the NBA, another antitrust case — you know,
they bring antitrust cases when it suits their purpose. That has been
settled. I do not know how. I do not think they should have done
that. I do not think Judge Tenney meant for ttiem to clean up all
their messes and get them out of the way so they could come down
here. He talked about a proposal, not agreement.
Finally, as you pointed out, Mr. Chairman, there is a $3 million
provision in liquidated damages for each club which between now
261
and 1974 refuses to press for legislation exempting merger. Each
club is bound by an agreement right this minute to stay with this
proposal for merger just as you said. That is no proposal. That is an
agreement. They have reached an agreement and I think they have
violated the court's order.
Now, another potential violation of the court's order was that the
clubs would not carry out any implied noncompetition pact or agree-
ment from the date of the injunction on. Such interleague competi-
tion died on May 7, 1971. INIr. Fleisher has pointed out that regard-
less of everything else, veterans are not going from one league to the
other. They just are not.
It is perfectly clear to us that an agreement has been reached that
there will be no player transactions while the ABA and NBA have
joined hand-in-hand to come here seeking this special interest legis-
lation.
The owners' good faith should also be measured by their rather
convenient use of the antitrust laws. Now, you all know about the
antitrust cases that they brought against one another and now have
secretly settled away from the light of day where we cannot find out
precisely what happened in those settlements.
Finally, on the question of good faith, just last Wednesday and
Thursday one of the most astonishing things happened. Representa-
tives of the owners approached my clients, the players, directly,
without going through me. As soon as we learned of this plan on
Wednesday we advised the NBA that we would apply to Judge
Tenney for an order to prevent any interference with the class
action we have pending in New York. Here is the incredible part.
We gave them the courtesy of telling them the next day we were
going to court to get an injunction against them approaching our
clients. Between Wednesday and Thursday, the day I finally got
down to court, the JS[BA clubs had apparently taken advantage of
my courtesy notice by scheduling a meeting with the players to dis-
cuss the merger.
We advised the court on Thursday of what had happened, of the
coercive powers held by the owners, of the fact that the players
could be easily harangued and browbeaten and threatened, especially
during the try-out season when there are rookies fighting for their
jobs. I think it is perfectly apparent the type of pressure that can be
put on someone who is fighting for his job to possibly come down
and testify for the merger or give up the lawsuit.
The court readily appreciated — and incidentally, most of these
meetings took place in locker rooms, which should give you some
flavor of what the owners were up to — the court readily appreciated
the power an owner has in such circumstances to frighten a player
with dire economic reprisal as the penalty for refusing to go along
with the wishes of the owner. The court promptly issued an order
which I have with me and which is attached to my testimony the
order prohibits the owners from any further direct communications
with the players about the lawsuit without going through counsel.
As I say, you have that order and it is an indication of the methods
that we have had to adopt to combat Avhat we considered to be incred-
ible tactics.
262
It is to the players' great credit and measure of their sincere
opposition to this merger bill that not one NBA player, rookie or
otherwise, has capitulated even to this surprising conduct by tlie
owners.
Again, I respectfully submit this to you to demonstrate that the
owners cannot be expected to rectify these anticompetitive abuses
which I have described today of their own volition. The changes are
going to come very grudgingly, either in court or because the Con-
gress of the United States demands that they come.
I, therefore, urge Congress and this committee to reject this ineq-
uitable half measure that has been put before you and either leave
us alone, which I would again respectfully request, or, if you must
act in this area, do the whole job and take our legitimate claims into
consideration as well as those of the fans — not just those of the
owners.
I appreciate the time you have given me.
Senator Ervin. Am I correct in my understanding that all the
players in the leagues that you represented in that antitrust law
action except one became a party to the action — and that one was
precluded from doing so by a prior agreement he had made ?
Mr. MiLLSTEiN. I have a signed piece of paper from every player
in the league authorizing this lawsuit.
Senator Ervin. Just one final question. That is, are you familiar
with the offer which the merger committee stated it would make to
the players?
Mr. Fleisiier. Yes ; Mr. Chairman.
Senator Hruska. National Basketball Association.
Senator Ekvix. Yes. Is it not designed to accomplish the same thing
as the reserve clause ?
Mr. Fleisher. Mr. Chairman, we have treated it in exactly the
same way. Every player in the league has turned it down on that
basis and we have felt that the taking away of the right of negotia-
tion exists under that offer as well as the existing reserve clause.
Senator Ervin. It is clearly designed to tie the player to one
team, notwithstanding the fact he may wish even after he has
finished his original contact and fulfilled his contractual obligations,
to play for another team. It is clearly designed to tie him to one team
by wliat they call as far as he is concerned, the right of first refusal
and by inflicting a penalty upon any other team that offers him induce-
ment after he becomes, ironically speaking, a free agent.
Mr. Fleisher. Correct, sir.
Senator Ervin. And it has exactly the same objective and the
same purpose and in operation it will undoubtedly have exactly the
same eft'ect as the reserve clause.
Mr. Fleisher. Al^solutely, sir.
Senator Ervin. That is all the questions I have. Any further ques-
tions ?
Senator Hart. As always, I enjoyed IMr. Millstein's presentation
and thank you, Mr. Fleisher.
Senator Ervin. I want to thank you gentlemen for your very illu-
minating testimony.
Senator Hruska. ISIr. Chairman, may I insert in yesterday's state-
ment which I made two exhibits to which I referred but I did not
263
offer them and they should be incorporated at the end of my open-
ing statement yesterday.
Senator Ervin. The chairman would
Senator Hruska. They deal with the benefits to the players and
benefits for the fans to which I referred.
Benefits Fob The Fan
Readily apparent benefits would include :
Establishment of basketball as a truly nationwide professional sport.
Better major league basketball in at least the present number of cities, with
prospects for increase.
More evenly balanced teams.
The opportunity for the fans in each team city to see all the stars of both
present leagues.
The development of healthy sectional and regional rivalries among teams.
An undisputed champion of professional basketball.
Senator Ervin. The acting chairman would like to request counsel
for the committee to insert in the record at this point the Harvard
law article mentioned by Mr. Millstein which appears, as I under-
stand it, in 81 Harvard Law Revieiv^ page 418, and also an article
which appears in the Maine Law Eeview, vol. 22, No. 2, 1970.
(The articles referred to follow. Testimony resumes on p. 287.)
The Balance of Power in Professional Sports
I. introduction
This note examines the problems of the professional athlete in dealing with
the "establishment" in the s])orts world. The basic framework for analysis lies
in the operation of our free enterprise ideas ^ in the practical context of profes-
sional sports. The professional athlete suffers from a severe lack of bargaining
power in his relationship with management. This bargaining imbalance is in-
consistent with the premises of our free enterprise system and must be elimi-
nated if the professional sports world is to avoid a total breakdown in
labor-management relations.
Any of three developments could occur in answer to this power imbalance.
One is more likely and desirable. Tliere could be governmental regulation of
some sort; the antitrust laws could be invoked to break up the owners' present
dominance ; or collective bargaining could be used to redress the bargaining
imbalance. Survival of a peaceful professional sports system demands certain
cooperative endeavors among the owners and, thus, the antitrust solutions are
of little utility. Governmental regulation is undesirable for a number of philo-
sophical and practical reasons.- not the least of which is that the government
has more important things to worry about. This note suggests tliat it is prefer-
aiile to eiiualize the bargaining power by strengthening the position of the
players through collective bargaining rather than by stripping the owners of
tlieir power and control." Sucli an approach must consider the present situa-
tion in professional athletics as it relates to the interests of all the parties in-
volved — players, owners, and fans who have supported these sporting enter-
prises and allowed them to develop. Collective bargaining is adaptable to
professional sports, and the existence of a large body of law and an ongoing
administrative body will enable the bargaining imbalance to be redressed. Sueii
a result can be accomplished without going outside the basic institutions of
our economic system and without creating new institutions.
^ f<ee, €.(].. .T. Galbraith, Amep.icax Capitalism: The Concept of Cocntervailing
Power (196.5) ; H. Wellington, Lap.or and the Legal Process (196S) ; Fre.v,
Democracii, Frre Enterprise, and CoUective Bargaintnri, in Labor Relations and the
Law 5.3 (J. WllUnms ed. 196.5) ; Frey, The Logic of Collective Bargaining and Arbitra-
tion. 12 Law & Contemp. Prob. 264 (1947).
- Frey. The Logic of Collective Bargaining and Arbitration, 12 Law & Contemp.
Prob. 265. 267 (1947).
' ^ee generally A. Cox, Law and the National Labor Policy (1960) ; J. Galbraith,
8upra note 1.
264
II. RESTRICTIONS ON THE ATHLETE'S BARGAINING POWER
"The athletic world promises to many a young man a rainbow of wealth,
status and acclaim. The professional sporting trusts are the end of the rain-
bow."*
The professional athlete in baseball, basketball, football, and hockey is
forced to deal with an employer who is a member of a closely knit group of
employers which monopolizes each professional team sport. This monopoliza-
tion has developed because of strict adherence to rules and regulations which
these employers, as a group, have imposed to govern the operation of these
sports. 5 In the face of such odds, the individual journeyman athlete, who is
the primary concern of this note, has little bargaining power. The highly paid
superstars are very few in number and are obviously better able to cope with
the difficulties inherent in the situation.^
These monopolies have developed from the use of a variety of techniques
which are illustrated by an examination of the "written and tacit
agreements" ^ that exist between the owners and comprise the very heart of
professional sports. § One must understand this structure to appreciate the ine-
quality in bargaining positions and the resultant al)uses that are inherent in
the professional sports world.
A. Reserve Clause
For the most part, the rules and agreements that operate in professional
sports are all patterned on those of baseball. ^ Today, however, the important
"reserve clause" ^o survives only in baseball and hockey. ^i In both sports, the
player must sign a uniform player's contract which contains this renewal
clause enabling the club management unilaterally to renew the old contract for
one vear.i2 The owner can exercise his discretion in decreasing the amount of
■» Keith. Developments in the Application of Antitrust Latvs to Professional Team
Sports, 10 Hastings L. J. 119, 120 (1058).
^ For a detailed discussion of the organizational structure of professional team sports
see Johnson. The Law of Sports: The Unique Performer's Contract and the Antitrust
Laws, 2 Antitrust Bull. 2.')1 (1957) ; Keith. Developments in the Application of Anti-
trust Latvs to P7-ofessional Team Sports, 10 H.\stings L. .T. 119 (1958) ; Pierce. Oraa-
rnzed Professional Team Sports and the Antitrust Laws. 43 Cornell L.Q. 566 (1958) ;
Topkls, Monopoly in Professional Spoj-ts. 58 Yale L.J. 691 (1949) ; Comment. The Mod-
ern Trend in Antitrust and Professional Sports. 22 Albany L. Rev. 272 (1958) ; Note.
Baseball Players and the Antitrust Laws, 5.3 Colum. L. Rev. 242 (1953) ; Note. The
Super Bowl and the Sherynan Act: Professional Team Sports and the Antitrust Laws,
81 Harv. L. Rev. 418 (1967) ; Note, Baseball and the Law — Yesterday and Today, 32
Va. L. Rev. 1164 (1946) : Comment, Monopsoni/ in Manpower: Organized Baseball
Meets the A7iitrust Laws. 62 Yale L.J. 576 (1953).
« It is quite apparent that the player who is of most value to his team In terms of
success on the field and at the turnstiles, enjoys a better bargaininj? position than the
average journeyman. See Comment. Monopsony in Manpower: Organized Baseball Meets
the Antitrust Laws, 62 Yale L.J. 576, 585 (1953) [hereinafter cited as Comment,
Monopsony].
'Complaint for Plaintiff at 4. Flood v. Kuhn, No. 70 Civ. 202 (S.D.N.Y., filed Jan. 16.
1970) [hereinafter cited as Flood Complaint]. This complaint asked for a preliminary-
injunction to enjoin the use of the "reserve clause" against Flood. Relief was recently
denied. Flood v. Kuhn. No. 70 Civ. 202 (S.D.N.Y., Mar. 4, 1970).
^ See Note. Baseball — An Exception to the Antitrust Laws, 18 U. Pitt. L. Rev.
131. 134 (195G).
^ Krasnow & Levy, Unionization and Professional Sports, 51 Geo. L.J. 749, 752
(1963) ; Pierce, supra note 5. at 600.
^" Uniform Player's Contract, S 10(a) provides:
On or before January 15 (or if a Sunday, then the next preceding business day) of
the year next following the last playing season covered by this contract, the Club
may'tender to the Player a contract for the term of that year by mailing the same
to the Player at his address following his signature hereto, or if none be given,
then at his last address of record with the Club. If prior to the March 1 next suc-
ceeding said January 15, the Player and the Club have not agreed upon the terms
of such contract, then on or before 10 days after said March 1, the Club shall have
the right by written notice to the Player at said address to renew this contract for
the period of one year on the same terms, except that the amount payable to the
Player shall be such as the Club shall fix in said notice ; provided, however, that
said amount, if fixed by a Major League Club, shall be an amount payable at a
rate not less than 80% of the rate stipulated for the preceding year.
"Note, The Super Bowl and the Sherman Act: Professional Team Sports and the An-
titrust Laws, 81 Harv. L. Rev. 41S, 421 (1967) [hereinafter cited as Note, The Super
Bowl and the She7-man Act] ; Topkis, supra note 5, at 702.
" Krasnow & Levy, supra note 9, at 752. See also Kckler, Baseball — Sport or Com-
merce*, 17 U. Chi. L. Rev. 56. 71 (1949) ; Memorandum for Plaintiff at 3, Flood v.
Kuhn. No. 70 Civ. 202 (S.D.N.Y.. filed Jan. 16. 1970) [hereinafter cited as Flood
Memorandum] ; Interview with Derek Sanderson, player with the Boston Bruins of the
National Hockey League, in Boston, Mass., Dec. 19, 1968 [hereinafter cited as Sander-
son Interview].
2(55
compensation to be paid to tlie player, but he cannot reduce the salary by
more than 20 percent of the previous year's figure.is This new contract will
also contain a renewal clause and, therefore, the player can be perpetually
bound to one team.^-^
The effect of this reserve system is quite obvious. Once a player initially
signs a contract to play professional baseball or hockey, he is relegated to ne-
gotiating with and playing for one organization unless he decides to retire
from active participation, or his contract is assigned to another club, or he is
released as a free agent. The power to go elsewhere is obviously one of the es-
sentials of true bargaining i)Ower and this power is destroyed by the reserve
clause.
The retirement alternative is not realistic to a man who has practiced many
years to develop highly specialized skills.i^ Retirement from baseball or hockey
Is less of an option for the players engaged in these sports than for the ath-
letes playing football and basketball. Unlike those engaged in the latter two
sports, the overwhelming majority of baseball players have only a high school
education.i<^ Most hockey players do not even achieve a twelfth grade educa-
tion because of the rigorous training schedule in the Canadian leagues.^" The
difficulty of obtaining suitable employment with a high school education or less
is evident. This factor increases the power of the owner vis-a-vis his players.
Assignment of the player's contract to another club leaves him in much the
same bargaining position in which he found himself when he was the property
of the first club ; the scenery is changed, but the contract remains the same.^^
Only when a player is given his outright release does have the ability to nego-
tiate with every other team in the professional leagues. This is a most desira-
ble position to be in. However, very rarely will a team release a player who
would aid the team as a performer or who has either cash or trade value.
More likely than not, when a player is released, he is not wanted by anyone.^s
B. Option Clause
The contracts used in basketball and football do not contain the reserve
clause per se, and on their face do not seem to bind the player perpetually to
one team but permit him to '-play out his option." ^o This "option clause" al-
1^ Note 10 supra.
" Since the renewed contract contains all the provisions of the original, Including the
renewal clause, once a plajer has signed with a club, it has a perpetual option on his
services.
Note, Baseball Players and the Antitrust Laws, supra note 5, at 244. See Topkls, supra
note 5, at COS ; Note, BasebaU and the Law — Yesterday and Today, 32 Va. L. Key
11(54, 1171 (1946) [hereinafter cited as Note, Baseball and the Law].
1= Most professional athletes have devoted many years to development of their skills.
Most baseball and hockep players have labored in the farm systems while those Involved
in basketball and football learned their trade on college campuses. They have all worked
arduously to win a position on a professional team and obviously are not anxious to
leave their chosen profession.
i» The baseball clubs prefer to enlist a player immediately upon graduation from high
school, and start him immediately in the training program. Most players therefore forego
a college education. Look, Feb. IS, 1969, at 74.
" Many hockey players will leave high school before graduation to devote more time
to the organized leagues in Canada. This handicap would put such a player in an even
less favorable position than most baseball players. Sanderson Interview, supra note 12.
>^ W'hen a player is traded to another team, his contract remains in force. Uniform
Player's Contract, § 6(a).
*■•* The advantages that a valued performer would have upon his unconditional release
are evidenced by the salary commanded by Ken Harrelson who signed a contract with
the Boston Red Sox after" he was released during the season. He negotiated an esti-
mated .^7.5,000 per year salary with Boston after making considerably less with
Kansas City. The Harrelson story Is an unusual one, for few owners, if any, other
than Charles Finley (owner of the then Kansas City team), would ever release a
plaver who could command $75,000 per year. Certainly Harrelson had substantial value
as trade material. See Note, The Super Bowl and the Shertnan Act, supra note 11, at
420.
^^ The option clause provides :
The Club may, by sending notice in writing to the Player, on or before the first
day of May following the football season referred to in Par. 1 hereof, renew this
contract for a further term of one (1) year on the same terms as are provided by
this contract except that (1) the Club may fix the rate of compensation to be paid
by the Club to the Player during said further terms, which rate of compensation
shall not be less than ninety percent (90%) of the sum set forth in Par. 3 hereof,
and shall be payable in installments during the football season in such further term
as provided in Par. 3; and (2) after such renewal this contract shall not Include
a further option to the Club to renew this contract.
Shulman & Baum, Collective Bargainino In Professional Athletics — The NFL Money
Bowl, 50 Chi. B. Rec. 173, 181 n.6 (1969). For discussion of option clause see Topkis,
266
lows the owner to renew the player's contract unilaterally for one year at a
reduction in salary of not more than 10 percent, and the player has the choice
of playing or sitting out the renewal year.-^ In any event, the new contract
does not contain a renewal clause and, therefore, the player in football and
basketball is bound for only two years — the year he initially signs with a club
and the renewal year. Theoretically he is then free to negotiate with any
team. 22
The situation is not as it may seem on the surface, however. Another provi-
sion in the league by-laws has been employed to deter players from playing
out their options.
Any player, whose contract with a League club has expired, shall there-
upon become a free agent and shall no longer be considered a member of tlie
team of that club following the expiration date of such contract. Whenever a
player, becoming a free agent in such manner, thereafter signs a contract with
a different club in the League, then, unless mutually satisfactory arrangements
have been concluded between the two League clubs, the Commissioner may
name and then award to the former club one or more players from the Active,
Re.serve or Selection List (including future selection choices) of the acquiring
club as the Commissioner, in his sole discretion, deems fair and equitable ; any
such decision by the Commissioner shall be final and conclusive.^^
The impact of this clause was felt by the New Orelans Saints [Saints] of
the National Football League [NFL] when that club negotiated a contract
with a player who had played out his option with the San Francisco 49ers
[49ers]. Evidently an agreement could not be reached by these two clubs and
the commissioner had to use his discretion to compensate the 49ers. The com-
missioner awarded the Saints' first round draft choice of that year to the
49ers and in addition the 49ers were granted the Saints' first round rights in
the following year's draft.^-i It was clear to most writers and knowledgeable
spectators, that the commissioner had dealt harshly with the "raiding" club.
By so compensating the 49ers, the commissioner was warning all clubs that
they would pay an unreasonable price for the services of a player who had
played out his option.-^ His warning has been heeded. Few, if any, players
have been successful in playing out their options and moving to another club.
The end result is that the option clause has the same effect as the reserve
clause because the player is still tied to the club with which he first
negotiated."
The basketball player is in a .slightly different situation from that of a foot-
ball player even though both sports are governed by the same type of option
clause.'-' Since the formation of the American Basketball Association [ABA],
the players who perform in the National Basketball Association [NBA] can
profit greatly by becoming free agents.
The Commissioner of the NBA has no power over ABA owners and, at this
time, the ABA is desperately trying to entice NBA players to play out their
options and switch leagues."^ The player is then in a position to bargain with
supra note 5, at 703; Note, The Super Bowl and the She)-man Act, supra note 11, at
422.
=' Shiilamn & Baum, supra note 20. The courts will not order a player to perform for
the one renewal year, and a few basketball players who have decided to switch to the
American Basketball Association have sat out the option year. Note 30 itjfra.
•2 Pierce, supra note o, at 601. This provision would seem to place the valued per-
former in a situation similar to that of Ken Harrelson. See note 19 supra.
=3 Art. XII, § 3, National Football League Constitution and By-Laws (as amended
Jan. 29, 1963) cited in Krasnow & Levy, supra note 9, at 7.53 n.ll.
^* David Parks was the player who played out his option with the San Francisco
49ers. Kevin Hardy had already been chosen as the Saints' first round draft choice and
he was t;iven to the 49ers along with the future draft rights. Interview with Jon Mor-
ris, plaver with the Boston Patriots of the American Football League, in Boston, Mass.,
Dec. 19, 1968.
'■• It is clear that with the exercise of his power In this situation the option clause
offers little more to the plaver than the reserve clause. Interview with Robert Woolf,
attorney-at-law, in Boston. Mass., Dec. 19, 1968 [hereinafter citea as Woolf Interview].
]\Ir. Woolf represents many professional athletes.
-" Woolf Interview, supra note 25 ; Pierce, supra note 5, at 602 ; Topkls, supra note 5,
at 703 ; Note, The Super Bowl and the Sherman Act, supra note 11, at 422 ; Look, Aug.
8, 1922. at 60-70. See Sports Illustrated, Aug. 12, 1968, at 39.
"Note, The Super Bowl and the Sherman Act, supra note 11, at 422. The Canadian
Football League is not considered as a like alternative to the American Basketball Asso-
ciation. The Canadian Football League caters mostly to football players who are not
skilled enough to plav In the AFL or NFL.
" See Portland Press Herald, Aug. 26, 1969, at 15, col. 4.
267
both leagues and even players who have not changed leagues have benefited
from the competition.-^ A merger of the two leagues similar to the football
merger of 1966 would put the basketball players in the same position in which
football players find themselves.
C. Enforcement
On many occasions courts have granted injunctions to enjoin players from
l)reaching their contracts and playing for other clubs, usually in a different
league. Recently, courts have enforced only contracts that contained one-year
renewal clauses, and have refused to enforce the perpetually binding reserve
clause.^° In fact, baseball has not attempted to enforce the reserve clause in
court since 1902.31 For the most part, club owners have used their own method
of enforcement — the l)lacklist.32
D. Blacklisting
Enforcement of the reserve clause may be denied by the courts, but the own-
ers' joint actions, which are clearly in restraint of trade,33 can accomplish the
same purpose.^* If a player disregards the reserve clause and attempts to ne-
gotiate with other owners, he will not find any owner willing to deal with him.
If a player jumps the major baseball leagues, the NFL, the NBA, or the Na-
tional Hockey League, in favor of playing in a non-participating league, it is
most probable that he will be blacklisted by his former league.^s To quell any
temptation on the part of an owner to negotiate, the commissioner has the
power to put a player on the ineligibile list ^a and a club may even be fined
for dealing with that player.'*^
The blacklist has also been used to eliminate a player whom the owners
have decided, for various reasons, not to have around any more. This device
can be used for the purpose of maintaining public respect for professional
sports by the elimination of gamblers, for example.^* However, the blacklist
can be and has been abused in the past. The professional football owners
blacklisted a capable performer because they felt he presented a danger to
-'■> Mr. Woolf negotiated with the ABA on behalf of John Havlicek and related that
the offers were in the neighborhood of one million dollars. As a result of this competi-
tion, basketball players are the highest paid performers in professional sports. Address
by Robert Woolf, University of Maine Law Forum Banquet, Dec. 6, 1969 [hereinafter
cited as Woolf Address] ; Lewis Alcindor was reportedly offered 3.2 million dollars to
sign with the ABA. Instead he chose to sign a million plus contract with Milwaukee of
the NBA. These offers far exceed any previously made to a college senior.
^" Brennan, Injunction Against Professional Athletes Breaching Their Contracts, .34
Brooklyn L. Rev. 61 (1967) ; Comment, Enforcement Problems of Personal Service
Cojitracts in Professional Athletics, 6 Tulsa L.J. 40 (1969) ; See Note, Baseball and
the Law, supra note 14. at 1171.
"^ Supra note 8, at 136.
3= Through the years organized baseball has had to handle its own difficulties with
very little assistance from the courts ; and it has been able to do this only because of
its tight-knit, monopolistic structure which makes exclusion of dissenters the means of
enforcing its decisions and edicts.
Note, Baseball and the Law, supra note 14, at 1164. For discussion of blacklisting see
Keith, supra note 4. at 129 ; Note, Baseball Players and the Antitrust Laws, supra note
5, at 244-45 ; Comment. Monopsony, supra note 6, at 591 ; Comment, Organized Base-
ball And The Law. 46 Yale L.J. 1386, 1387 (1937).
^" See Pierce, supra note 5, at 590; Note, Baseball Players and the Antitrust Laws,
supra note 5, at 249-50.
"^ Note 32 supra.
3'' See, e.g., Radovich v. National Football League, 352 U.S. 445 (1957) : Gardella v.
Chandler, 172 F.2d 402 (2d Cir. 1949) ; Eckler, supra note 12, at 56-59; Topkis, supra
note 5, at 691-95 ; Comment, Monopsony, supra note 6, at 591 ; Professional Football
Held Within Purview of Sherman Act, 57 Colum. L. Rev. 725 (1957) ; Look, supra
note 26, at 70.
2" For discussion of Commissioner's power see note 7 supra ; Eckler. sxipra note 12, at
69 ; Keith, KUjira note 4, at 131 ; Krasnow & Levy, supra note 9, at 755 ; Note, Baseball
Players and the Antitrust Laws, supra note 5, at 245; Note, Baseball — Ati Exception to
the Antitrust Lriics, supra note S, at 132-33 ; Comment, Monopsony, supra note 6, at
5S3-84. The Commissioner of baseball most recently used bis power to impose indefinite
suspension on Dennis McLaln of the Detroit Tigers who was reportedly Involved in
gambling activities. Sports Illustrated, Feb. 23, 1970, at 16 (indefinite suspension
subsequently withdrawn).
^' See Flood Complaint, supra note 7, at 7.
^^ See Molinas v. National Basketball Ass'n, 190 F.Supp. 241 (S.D.N.Y., 1961) ; Note,
The Super Bowl and the Sherman Act, supra note 11, at 425 ; Sports Illustrated,
supra note 36.
26S
their domination of the players by actively attempting to organize a players'
''"poTentially the most serious area of abuse through use of the blacklist in-
vohes a plaver's personal freedoms. There is no question that a star perform-
er's ablity to become involved in controversial issues is much greater than
?Lat (^f the 3-ournevman player.^o The average player may be labelled as a
trSlblemaker and therefore undesirable whereas the star performer is usually
consiSd ''untouchable.''^^ One's right to exercise his personal civil rights off
the field may in some cases be directly related to his ability to perform on it
The potenSl for abuse through the utilization of the blacklist is enormous
ond even f this device is not abused, it affords the owners the ability to
Sengthen/throiigh collective action, their bargaining position over the play-
GTS
E. Common Draft
In three of the four sports under discussion, the player most probably will
never Sfve Se opportuni-ty to bargain with two employers for his services at
anv time in his entire career. All four sports use systems whereby each team
owns tTe li'-hfs to negotiate with a certain player and these rights are re-
spec el by Si other telims. in all four sports the common dnift ;^ ^mp «^.^^f^
Each team is allotted a number of draft choices and controls thev^^Ms to the
Dlaver whom they have decided to draft.^^ in hockey, each team had terri-
torial rSMswS afforded it the sole right to negotiate w-ith a Player wbo
iTvS w mn the team's assigned territory, but the common draft removed the
territorial rights." Only in basketball, where two leagues are current y opeiat-
ingwm a player be able to bargain with two employers. The result of this
competition has made basketball the highest paying of all four sports."
F. Assignment of Contracts
The assignabilitv of a player's contract is very basic to professional
teJr^pSs^s The blacklist, reserve clause, and common draft a contribute lo
the superior bargaining position of the owners but the prerogative to trade a
man on a Somenli^s notice, as though he were a chattel, demonstrates the man-
ner inVhi^h^Ms power has been used. Only a few superstars have been able
'"^pSS fheSbiS;^?rS?^l"nLssary for the successful operation of pro-
fessLnaFteam spor s, but the impersonal cruelty with which trading is carried
out i inelcusabie. A noted baseball player who had starred for the St. Lou .
CardtnSs for 12 years and was many times honored as the finest deensne
center fielder in the National League was notified by a four-line letter tnat
afd 'Dec. 3, 1969. at 21. col. 1. .^
"''See note 6 siivra; Sanderson Interview, supra note 1^.
"Sanderson Interview, suj^ra note 12. ^ ^ ^j^^ gj^^^.,
JJ'f^l^l^rSS."i^irS'S^'!^^^^r^°^^^ at 601. 604 -. Krr.-.ow ^
Levv, supra note 9, at 753 ; Flood Memorandum, supra note 12. at 8-4.
■*3'Sanderson Interview, supra note 1-.
^< Woolf Address, supra note 29.
*5 TTniform Plaver's Contract, § 6(a). , j v,„ <.!,„ n^,1h romi rpo coi rrned
^SfS-TJliZT,utl"l'o«"£Tv,m, «e three otter sportj^ « 'VTllrl/e
Cardinals' General Manager.
269
his contract had been assigned to another club. This incident exemplifies the
lack of respect with which the players have been confronted when dealing
with management.
The preceding discussion of the operational regulations and agreements that
function within professional sports demonstrates the power and control pos-
sessed by the owners. It is evident that the owners monopolize their respective
sports, and that their concerted action leaves all but the superstar devoid of
any bargaining power. The issues presented are whether there can be valid
reasons for the continued existence of such enormous power and, if so, how
the players can protect themselves in the face of it.
III. CONTENTIONS OF THE PARTIES INVOLVED
Those who attack the organizational structure of professional sports declare
that a system comprised of reserve and option clauses, a common draft, an as-
signment clause, and blacklisting procedures, creates a monopoly which vio-
lates the antitrust laws.^s All of these devices are used to restrain trade.^^ to
eliminate any competition for a player's services,5o and ultimately to decrease
a team's salary expense.si The basic contractual clauses and the owners who
take it upon themselves in combination to enforce these regulations clearly vio-
late the antitrust laws.^s
This system, which binds a player indefinitely to one organization having the
power to assign his contract to any other team, has often been charged with
promoting involuntary servitude.^s The player never has the right to choose
his employer or bargain for terms and conditions of employment.^* Judge
Frank in Gardella v. Chandler ^^ in 1956 expressed the same feelings that are
Dkar Curt : Enclosed herewith is Player Report Notice #614 covering the OUT-
RIGHT assignment of your contract to the Philadelphia Club of the National League,
October 8, 1969.
Best of luck.
Sincerely yours,
BiNG Devine, General Manager.
Letter from Blng Devine, General Manager, St. Louis Cardinals, to Curtis C. Flood, Oct.
8, 1969, copy attached as exhibit C, Flood Complaint, supra note 7.
** Every contract, combination in the form of trust or otherwise, or conspiracy, in re-
straint of trade or commerce among the several States, or with foreign nations, is de-
clared to be illpiral :
15 U.S.C. § 1 (1964).
Every person who shall monopolize, or attempt to monopolize, or combine or conspire
with any other person or persons, to monopolize any part of the trade or commerce
among the several States, or with foreign nations, shall be deemed guilty of a misde-
meanor, and. on conviction thereof, shall be punished. . . .
15 U.S.C. 5 2 (1964).
^^ See Eckler, supra note 12, at 59 ; Note, Baseball Players and the Antitrust Laws,
S7ipra note 5. at 248-57 ; Flood Complaint, supra note 7, at 8. Most authors who have
written about the org.inizational structure of professional team sports suggest that this
structure is violative of the antitrust laws.
=0 See Note. BasehaU Planers and the Antitrust Laics, supra note 5, at 249 ; Interstate
Commerce — Restraint of Trade — Professional Baseball May Constitute Interstate Com-
merce Within Antitrust Laws. 62 Harv. L. Rev. 1240. 1242 (1949).
^' Flood Memorandum, supra note 12. at 12 ; Keith, supra note 4, at 128 ; Note, Con-
stitutional Law — Baseball and the Antitrust Laws — A Game or a Conspiracy f, 24 Notkk
Dame Law. .372, 374 (1949).
»2 Note 49 supra ; Flood Complaint, supra note 7, at 5-6.
^3 Flood Memorandum, supi'a note 12, at 6, .32-35 ; Woolf Interview, supra note 25.
" It has been shown that once a player is chosen in the common draft, he is rele-
gated to deal with one employer, and in this position has little ability or power to
dictate the terms of his contract. See Flood Memorandum, supra note 12, at 31-35.
^5 172 F.2d 402 (2d Cir. 1949). I think it should be so distinguished. [Federal Base-
ball Club of Baltimore v. National League of Professional Baseball Clubs, 259 U.S. 200
(1922)] If possible, because (assuming as we must, at this stage of the litigation, the
truth of the statements in the complaint) we have here a monopoly which, in its effect
on ball-players like the plaintiff, possesses characteristics shockingly repugnant to moral
principles that, at least since the War Between the States, have "been basic in America,
as shown by the Thirteenth Amendment to the Constitution, condemning "involuntary
servitude," and by subsequent Congressional enactments on that subject. For the "re-
serve clause." as has been observed, results in something resembling peonage of the
baseball players. By accepting the "reserve clause," — and all players in organized base-
ball must "accept" it — a player binds himself not to sign a contract with or play for,
any club other than the club which originally employs him or its assignee. Although
many courts have refused to enforce the "reserve" clause, yet severe and practically ef-
ficacious extra-legal penalties are imposed for violation. The most extreme of these pen-
alties is the blacklisting of the player so that no club in organized baseball will hire
him.
Id. at 409-10.
78-465— 72— pt. 1 18
270
apparent in the following excerpt from a 1914 case, American League Baseball
Club V. Chase.^'^
"While the services of these baseball players are ostensibly secured by vol-
untary contracts a study of the system as hereinabove set forth, and as prac-
ticed under the plan of the National Agreement, reveals the involuntary char-
acter of the servitude which is imposed upon players by the strength of the
combination controlling the labor of practically all of the players in the coun-
try. This is so great as to make it necessary for the player either to take the
contract prescribed by the commission or abandon baseball as a profession and
seek some other mode of earning a livelihood. There is no difference in princi-
ple between the system of servitude built up by the operation of this National
Agreement, which as has been shown, provides for the purchase, sale, barter,
and exchange of the services of baseball players — skilled laborers — without
their consent, and the system of peonage brought into the United States from
Mexico and thereafter, existing for a time within the territory of New Mexico.
The quasi peonage of baseball players under the operations of this plan and
agreement is contrary to the spirit of American institutions, and is contrary to
the spirit of the Constitution of the United States." ^'
This statement is applicable to the four sports being discussed, for only in a
rare situation will a player have the ability to choose his own employer. The
players therefore do not enjoy a system of free and voluntary labor.ss
Closely related to this involuntary servitude contention is the fact that these
restraints on a player's freedom of contract run counter to the public policy of
the United States 'as expressed in the Norris-La-Guardia Act ^^ and the Na-
tional Labor Relations Act.^o From the very instant that the rights to negoti-
ate with a player are respected by other clubs, the player has lost his ability
to sell his services in the labor market.
The owners,«i most authors who have dealt with this sub3ect,62 congressional
investigating committees.63 and even a majority of the players e-* agree that
the described operational regulations are necessary for the successful operation
of professional team sports. Cooperation is necessary for scheduling, for main-
taining equality of playing ability among clubs, for continuity of personnel,
and for preservation of the reputation of profes.sional sports.^s The contention
is that without the draft and the reserve and option clauses, players would be
free to negotiate with any team at the end of a season. This would create bid-
ding wars even worse than those which exist between the ABA and NBA
today and which did exist in the American Football League [AFL] and NFL
prior to the 1966 merger, ^g since all the teams would be allowed to bid instead
of just two as is the situation in basketball. This competition would force
owners to pay unreasonable salaries to keep their players and eventually the
wealthier clubs would end up with all the talent and good competition would
cease. With the dominance of a few teams, the spectators would lose interest
and stop patronizing their teams ; the owners would suffer financially ; and the
leagues would be destroyed. s'^
Others have suggested that the elimination of the reserve clause m baseball
would not give rise to a situation where the player bounces from one club to
5«86 Misc. 441, 149, N.Y.S. 6 (1914).
"/d. at 465, 149 N.Y.S. at 19.
58 Pollock V. Williams, 322 U.S. 4, 17 (1944).
"U.S.C. § 102 (1964).
«('29 U.S.C. § 151 (1964). ,, ^ , x,, , .^
«i It Is quite evident that the owners favor this system which places them In the su-
^"^oJ'^Jff^^Atchlnson, V/ie l/orfcrn"^ Trend in Anti-Trust and Professional Sports, 22 Al-
bany l!'Rev. 272, 285 (1958) ; Eckler, supra note 12, at 78; Pierce, supra note 5, at
588-89 ; Comment' Monopsony, supra note 6. at 627. ri«,,„
"SUBCOMM ON THE StDDY OF MONOPOLY POWER OF THE HOUSE COMM.
ON THE Judiciary, 82d Cong., 2d Sess., Report on Organized
Baseball 228-29 (Comm. Print 1952) ; H.R. Rep. No. 1720. 85th Cong., 2d Sess. 8
^ <^*Hearinqs Before the Antitrust Subcomm. of the House Comm. on the Judiciary,
85th Cong., 1st Sess.. ser. 8. pt. 3, at 1239 (1957).
«5 Note Baseball Players and the Antitrust Laics, supra note 5, at 252-53 , Note.
Baseball— An Exception to the Antitrust Laivs, supra note 8, at 131-132. These are the
reasons given by those who would argue for the survival of the current regulations.
"For a discussion of the 1966 merger between the AFL and NFL see Note, The
Super Bowl and the Sherman Act. supra note 11. at 432-34.
«' Pierce, supra note 5, at 588; Note, The Super Bowl and the Sherman Act, supra
note 11, at 421 ; Comment. Monopsony, supra note 6, at 586.
271
another demanding huge bonuses.es The owners realize the value of balanced
competition and would be hesitant to suffer retaliatory measures prompted by
heir own raids.ee it has been predicted that the owners woufd naturally
wln'*?"^^' ^Y agreement, not to negotiate with another team's pFayersA/so
football IS pointed to as the example of the stability that baseball could
enjoy.- Howeyer, eyen if the courts were to mandate the abolition of the re
serye clause and competitiye bidding were allowed, the same abuses would be
preseiit but the cause would not be so obyious. The same restrafnt ^? trade
would be operating, only instead of being written in a player's contract the
agreement would be a silent one among the owners. MoreoyerL tSs note has
shown football is not the epitome of free competition after which one should
hope to pattern baseball. It is generally conceded that the rrtaiatory powers
possessed by the commissioner of football haye placed football SaverlinZch
SlteTnfX^;.^eL?:e'Ss^\x^^^^'^" -^ ^^-^^ '^^ oP^^o- eLui: L^StSS
Whether professional team sports could operate without the aid of the
agi-eement^ and rules that exist today is not really important for the purposes
of this note. It may be true that these sports would be thrown into chaos and
Srr n/"'^''''"'""^ "^^ ^''^ ^^ '^^ 'l^^i^^^ "P«" ^'^i^l^ they haye depended
tor so long Howeyer, eyen without these devices, many financially powerful in
l^'\^ this nation rely on professional sports, e.^.f television ^aradverUs-
ng ■- and professional sports enjoy too large a constituency for these commer-
cial interests to ignore.^3 This note is not an attempt to predict what wSiTd
occur If the owners were denied these devices, but rather to suggest that an
other solution is available to remove the imbalance of bargainii!|7owei that
IV. SUGGESTIONS FOR INCREASING PLAYERS' BARGAINING POWER
Numerous bills have been introduced in Congress attempting to define the
applicability of the antitrust laws in baseball.- Some haT proposed blanket
exemption from the laws and others have endorsed complete adherence to
beeTenacTed. ''''''''"'''' ^ compromise of these two extremes.- None have
The Supreme Court exempted baseball from the antitrust laws in 1922 "s and
reaffirmed its position in 1953.^^ But it would not matter if baseball were
made subject to these laws. The other three professional team sports havraU
hX' I'^'^T'^ "^'"^ " *^^ ^"^"^ «^ the anti-trust laws,^^ and yet no meSgfu
tigation has ever been pursued in the courts. All the cases that have attacked
the regulating structure of these sports have been settled out of court bSause
te organizational establishment has always been reluctant to aflow cases to
no^Sefent^^!' '''''''''''''''' ^«"trol.- Baseball has treated potential litigation
'^Topkls supra note 5, at 707-08; See Sports Illustrated Feb 9 1970 nf q
For siiggested solutions to inequities see Pierce, supra note 5 at 607-13 ■ Note Ba,f
"" Id.
" Note 26 supra.
Galbraith, The New Industrial State (1967) powertul torce. J.
'^ Eckler, sup7-a note 12, at 78
(1969^*^°'''''' ^' ^''^ ^^^^ ^°'"^ '° -^'''^ *''*^ ^«" ^«»^e-^ 20 Lab. L.J. 239, 241-42
'^Eppel, Professional Sports, 33 ABA Antitrust LJ 69 74 n9ft7^ • K■^^^■^.
note 4, at 135-37; Pierce, supra note 5, at Slsflll^tent^ltpL'nrsup^an^^^^^
200 aS ^^'^^^^^ C^"b ^- National League of Professional Baseball Clubs. 259. U.S.
"Toolson V. New York Yankees. 346 U.S. 356 (1953)
272
In 1966 when the opportunity was present for litigation challenging the
mer-er of' the AFL and NFL, which clearly was intended to stifle competition
for players. Congress came to the rescue of professional football and exempted
this merger from the antitrust laws,so while aflirming that football, basketball,
and hockey were within the purview of these same laws.Bi One can only con-
clude that^ baseball would enjoy the same monopolistic control that i« enjoyed
bv the other sporting establishments if the Supreme Court should rff'^Jf'
S-aJBaseMll Club v. National League of Professional Baseball Clubs_^^ and
Toolson V. New York Yankees.^^ This result would do little to equalize the
bargaining positions of the players vis-a-vis the owners.
A. Collective Bargaining
Collective bargaining has been the method used by the players to countervail
the power and control of the owners.B* This technique has met with some
success S5 but nerhaps faces its most serious encounters m the future.
Mos? authoSIes have dismissed the u.se of collective action by professional
athletes because of the individualistic talent involved.s^ A professional player
fs not an industrial employee whose skills are like those of all his fellow
workers He Sa uniquely skilled individual who has, as his only bargaining
weapon in wage negotiation, his ability to perform. The abilities^ o. each
plaver vary so much that individual action must be mamtained.ss Therefore,
wage negotiation, the single most important unifying factor m industrial ccHlec-
tive act'on Is left solely to the athlete. However, this omission has not been
fatal to colh^tive activity by the players, as they have numerous other com-
"^cToliecf'vf bargaining has been and can be used by the athletes to advance
thS positions in many areas. Endless schedules, exhaust ng trayellmg, living
and w'orking conditions are items which relate directly f ^h^ ^^.^f^^jA,
er's career The more strain which is physically placed on the Pl^^^ei. tne
shorte? will be his tenure.^o Minimum salaries, pension plans, insurance plans,
exMbitioT game compensation, grievance procedure, and numerous other as-
pec s of thf i^ofSnal sports life affect every player financially while active
oTretired.^i These various interests demonstrate the fact ^^^^ f^^vT^Rtto
individualistic world of professional sports, enough common factors exist to
nnifv the ulavers for purposes of bargaining with the owners.
" Owi eii Mve alway^s taken a rather paternalistic attitude toward their p ay-
ers and have been quite reluctant to relinquish any power. The football play
ers who decided to unite in 1968 to present their demands had to overcome
Sis atUtude^2 The confrontation that occurred between employers and em-
ptyeef reaffirmed the potential of collective bargaining in the area of profes-
sional sports and also demonstrated the importance of nmty ^^^_. ^_^.. g^.^.
supra note 11, at 433.
SI 1066 U.S. Code Cong. & Ad. News 4o7S.
82 Note 76 supra.
■-"-The tootb»ll Plajers have not a, jet ctallenged the option d»™e but arc «pecM
to m tbe neat future. Sec Shnlman i ^ui^;, W™ "»",B' ^Votiier ter^^^^
*„;o'.t""a>;;a°S".?LtL1,.S??o"p;oVe''i. S"^L.rSobe°U*l8,'l9T0, at as, CO..
S9 Id ; Sports Illustrated, supra note 26, at 41.
"OKrasnow & Levy, supra note 9, at 760. Konnett Basehall Faces 1970 Season
MShulnmn & Baum, supra note 20, at 174-77 ^oppett i^«seoa»^ao Boston
With Many Off-Field ProhJems. N.Y. Times, Feb. 15, 19]"- S o. at *, coi. ^,
Globe., supra note 86 ; Portland Evening Express, supra note 85.
«Shulman & Baum, supra note 20, at 170.
93 jSfee Shulman & Baum, supra note 85.
273
both stars and journeymen encouraged the owners to recognize the association
as the sole bargaining representative of the players.^* The NFLPA had chosen
carefully the items of common interest to present to the owners for negotia-
tion, and had also set up a simple but effective system of communication
which kept each player well informed of the progress being made.^^ In short,
the NFLPA had done everything possible to unify the players and make them
all a part of the effort. The owners, fearful of a strike and the friction that
might result within a team if some players decided to break the strike, re-
solved to keep the training camps closed until the dispute was settled.^^ This
novel approach — owners have usually used the technique of divide and
conquer "^ — showed that the owners not only wanted harmony within their
teams but also that they respected the efforts of the players, and realized that
an attack on this group might only strengthen the bonds that unified them.
The owners acquiesced to player demands and the endeavor was considered a
success.^s
Baseball players are faced with the same paternalistic attitude of the own-
ers who similarly have been reluctant to yield to players' demands.^s Prior to
the 1969 season, the Major League Baseball Players' Association [MLBPA],
represented by one member of each team and the MLBPA's attorney, Marvin
Miller, attempted to force the owners to contribute more television revenue to
the players' pension fund. 10° Under the 1968 contract, the "basic agreement,"
between the owners and the players, the owners contributed 4.1 million dollars
to the pension fund from the total television revenue of 12.3 million 1^1 (33.33
percent). In 1969, the players initially requested 6.5 million but had to reduce
this demand to 5.9 million early in the negotiations. The owners on the other
hand offered 5.1 million of the new 16.5 million television pact. The end result
of the negotiations was a 5.45 million dollar contribution 102 (33.03 percent), a
smaller percentage than that called for by the 1968 contract. The owners had to
increase their initial offer 350,000 dollars while the players had to settle for
1.05 million dollars less than their original request. Elementary analysis of
these figures clearly shows that in respect to this major issue the concessions
made by the owners were illusory, and it is evident that this collective effort
did not equalize the bargaining positions.
In December of 1968 when the MLBPA decided to demand an increased con-
tribution to the pension fund, the support from the players, the stars and jour-
neymen, was overwhelming. Some players had already signed contracts but
there was every indication that the boycott of spring training would be suc-
cessful in forcing major concessions from the owners.^o^ However, as the nego-
tiations dragged on and support from the players began to waiver, each day a
few more players would report to camp. The owners brought tremendous pres-
sure to bear on the established players and rookies, and succeeded in weaken-
ing the MLBPA's bargaining position with each signing or rumor of an ex-
pected one.io^ The MLBPA did not negotiate from a position of strength.
Comparing the relative successes of both confrontations, it is clear that the
unity and respect achieved by the football players allowed them to bargain
with the owners with much more power than was possessed by the baseball
players. 105 The owners in football, of course, contributed to the players' unity
by keeping the training camp closed, whereas the baseball owners actively pro-
ceeded to divide and conquer. The support of the star performer must have
been recognized by the football association as being most important to their ef-
forts in terms of unity and favorable public opinion. los This apparent percep-
tiveness was realized during the baseball dispute when it was evident that the
signing of a star performer meant the surrender of numerous members of his
team. 10^ This player, who is best able to withstand pressure because of his
*' Shnlman & Baum, supra note 20, at 174-75.
»=> Id. at 176-77.
3'^ Id. at 180.
"^ Veeck Interview, supra note .30.
t* Shulman & Baum, supra note 20, at 180.
°^ Veeck Interview, supra note .39 ; Look, supra note 16.
^"0 See Portland Press Herald, Dee. 5, 1968, at 26, col. 1.
101 Portland Evening Express, supra note 85.
'"^ Id.
"^ Note 100 supra.
^'>*Id.; Portland Evening Express, Feb.25, 1968, at 14, col. 1.
'"^ See Portland Evening Express, supra note 85.
^•^ See Krasnow & Levy, supra note 9, at 765 ; Shulman & Baum, supra note 85.
107 Portland Evening Express, supra note 104, at col. 4.
274
value as a player and as an attraction, means a great deal to the bargaining
power of a players' association and, consequently, the advances made on behalf
of the players. 108
It must be noted that, for the most part, the star performer is in a position
of strength when dealing with the owner. His presence adds greatly to the suc-
cess of the team and to the number of fans that attend the game.io^ Although
he is sympathetic to the items of common interest mentioned, his large salary
compensates for a multitude of owner's sins. He is aware that every conces-
sion given by the owners costs thousands of dollars and diminishes the avail-
able salary fund from which star players are compensated.!" Therefore, with-
out any safeguards to prohibit this performer from withdrawing support, a
players' association must rely on the unselfish attitude of the star. This reli-
ance was misplaced in the baseball dispute and costly to the MLBPA.
B. Protection Afforded by the National Labor Relations Act
The safeguards that are necessary to strengthen the players' associations
and equalize the bargaining positions of the players and owners are offered by
the National Labor Relations Act [NLRAl.m A major purpose of this Act is
to promote the voluntary and amicable settlement of disputes.112 Tj^^g j.ypg ^f
settlement can only be achieved when the parties are able to exact concessions
from each other. As noted previously, concessions can only be obtained when a
partv possesses bargaining power. To promote power in the employees, the Act
permits concerted activity."3 which includes the right to strike,ii* and also
prohibits certain oppressive tactics.^is If the players' associations were able to
take advantage of the protection offered by the NLRA, the technique of divide
and conquer would evoke unfair labor practice charges against the owner. This
Act would allow individual salary negotiations but would prohibit the owner
from pressuring the star performer into breaking with a players' association
during a period of collective bargaining.ne This prohibition would further the
unity of the players and alleviate the dissension factor which worreid the foot-
ball "owners to such an extent that they kept their camps closed.
The NLRA as a whole offers the labor organization many advantages. Of
primary imiwrtance would be the Act's safeguards which would further the
collective effort and consequently increase the bargaining power."' The ques-
tion remains whether the National Labor Relations Board [NLRB] would as-
sert jurisdiction over professional team sports. i^*
C. Jurisdiction of NLRB
The NFLPA was hopeful of enjoying the protection of the NLRA in the 1968
dispute with the owners and, therefore, registered with the United States De-
partment of Labor as a labor organization.ns However, at that time the only
consideration given professional team sports was unfavorable.120 in 1946 the
American Baseball Guild sought an election to establish itself as representa-
tive of the players and the Board denied jurisdiction.i2i The NFLPA in 1908
was ready to advance convincing arguments but this was never necessary due
to the owners' recognition. i- AH doubt is removed by the recent Board deci-
le Note 106 supra.
""' Note 6 supra.
"" Supra note 107, at col. R.
"129 U.S.C. §§ 151-fiS (1964).
"=29 U.S.C. § 151 (1964).
"3 29 TT.S.C. § 1.57 (1964).
"^29 U.S.C. § 16.3 (1964).
"^29 U.S.C. S 158 (1964). , ^, ,, ^ .
"'Althonsrh the athletes could ne-otlate Individually for wages the owners _woiild not
be able to practice tlie technique of divide and conquer J. I. Case Co. v. JNL,Ki5, 6^1
U.S. .3.".2 (1944) ; 29 U.S.C. § 15S (1964). „ ., v, ,
1" This increased bargaining power could further the progress for a collective bargain-
in" contract with an arbitration clause. Enforcement of such a clause could be sought
in the courts This is. of course, true whether or not the NLRB asserts jurisdiction.
Textile Worl.-ers Union v. Lincoln Mills. .358 U.S. 448 (1957) ; United Steelworlsers v.
American Manufacturing Co., .363 U.S. 584 (1960). „ „ ^, , oa t .0 t t oqq
"s,See Hoffman, Is the ^'LRB Going to Play the Ball Gamef, 20 Lab. L.J. Z6y
(1969) ; Krasnow cfe Levy, supra note 9, at 777.
"» Shulman & Baum, supra note 20, at 174.
^" Hoffman, supra note 118, at 244,
'-' If'-
1" Shulman & Baum, supra note 20, at ISO, n.4.
275
slon in American League of Professional Baseball Clubs and Association of
National Baseball League Vmpires.^-^ The Board decided to assert jurisdiction
over baseball.124 in denying the baseball clubs' claim that jurisdiction was not
necessary because of the self-regulating system, the Board stated. "[I]t is pat-
ently contrary to the letter and spirit of the Act for the Board to defer its un-
doubted jurisdiction to decide unfair labor practices to a dispute settlement
system established unilaterally by an employer or group of employers. "125
The Board recognized the unilateral power of the owners and, to promote
collective bargaining, has afforded baseball and the other sports the protections
available in the Act. It seems only logical that the players' associations should
take advantage of this newly extended aid when confronting the owners in fu-
ture di.sputes.
D. National Affiliation
The players' associations can be expected in the near future to challenge the
rules and regulations that operate in professional sports. Modifications of the
reserve clause have already been suggested. The football players left the op-
tion clause out of their 1968 confrontation, but it is sure to be on the agenda
within a couple of years.i-c The lack of concern for the individual that is ap-
parent in the trading of players is a prime target for attack.^sr Certainly it is
time for an impartial arbitration procedure to be instituted as a substitute for
vesting enormous power in the owner's man, the commissioner.^^s a strong
collective effort could accomplish this goal, either by including an arbitration
clau.se in the collective bargaining contract or by establishing an independent
commission. 120 All of these objectives may be accomplished by the currently
existing players' a.ssociations with the aid of the NLRB, but affiliation with a
national labor union would assure success.
Affiliation with a national union has been eonsiderefl by the players and dis-
missed for fear of damaging their public image or antagonizing the owners.i^o
The football players refused affiliation in 1968 and were successful without
it."i Greater bargaining power which can be afforded by national affiliation
will be necessary to confront the owners faced with a challenge to the basic
foundations of professional sports.
In the past, the players" associations have only used the threat of union af-
filiation as a bargaining weapon.^- Actual affiliation would offer all the advan-
tages of a skilled organization: (1) Education of the still unenlightened mem-
bers of the public who would rather not view the athlete as an employee
joining a union to save himself from further exploitation; (2) education of
the athlete who views his occupation as inappropriate for unionization; (3) fin-
ancial backing and skill necessary to gather unanimous support for the union,
which in turn would depend less on the whim of a star performer; (4) experi-
ence in negotiation; (5) the potential of a strike having much greater effect if
a national union is involved: and (6) ability to apprise the public of player
grievances and influence public opinion which is important to the owners.i^-^
The totality of all of these factors would give to the players the bargaining
power necessary to challenge the rules and regulations that have enabled the
owners to exploit the majority of players. National affiliation will provide the
^=■'.5 CCH Lab. L. Rep. 1 21,448, at 27,431 (NLRB 1969). See Flood Memorandum,
supra note 12. at 17.
»-*5 CCH Lab. L. Rep. H 21.448, at 27,431 (NLRB 1909).
'2-- Td. at 27,433,
'-" Note 80 supra.
'=■ It is obvious that the management of a professional team has little concern for the
player as an Individual when an established player, such as Curt Flood, is notified of
his transfer by an index card and a four line letter, Mr, Woolf feels that the player
should be notified of a pending trade and {riven time to organize his family and "his
other business affairs. Woolf Address, note 29 supra.
'-^ See Note 36 supra. The President of the NHL settles all hockey disputes between
owner and player. Sanderson Interview, supra note 12 ; Note 23 supra. See also Look,
supra note 20, at 08.
i-» A panel or commission could be established to settle owner-plaver disputes. Kras-
now & Levy, supra note 9. at 770 ; Veeck Interview, supra note 39.
"" Krasnow & Levy, supra note 9. at 774.
"' Shulman & Baum, supra note 20, at; 17.5,
^"■" Krasnow & Levy, supra note 9, at 1 73-74.
"=/f/. at 775-76.
276
unified effort that may be impossible to develop when the objectives are so
dear to the owners.
"A national union or federation, eciuipped with greater financial, political,
and research resources, would be a more effective body for developing greater
bargaining strength and a strong tradition of union membership. Only such a
group would be able to develop the coordinated drive of organization and edu-
cation needed to form a series of unions in each sport throughout the
country." ^s^
This suggestion, made seven years ago, seems more appropriate today when
one considers the developments of the past few years and the confrontations
that lie ahead.
The Super Bowl and the Sheeman Act — Professional Team Sports and
The Antitrust Laws
For millions, sports results are the most important news of the day, and the
success of a team can send a whole city into unrestrained rejoicing.^ But pro-
fessional sports' prominent part in American life should not obscure the fact
that they are truly big business. There are now roughly 70 "major league"'
sports teams,2 with further expansion planned. ^ Professional sports are prosper-
ing: every major league has added new teams since 1960, a whole new profes-
sional sport — soccer — is being established, and a new basketball league was
formed this year. The economic impact of major league sports extends far be-
yond the players, owners, and fans directly involved in the exhibitions, signifi-
cantly affecting the commercial life of the cities in which the teams play.-*
The emergence of professional sports as a major industry highlights the
question of whether the peculiar practices of the trade meet the demands of
the antitrust laws.^ The antitrust laws express a national faith that competi-
tion is the most appropriate and most efficient regulator of economic activity,
that the demands of the market should determine the price and quantity of
goods and services and the divison of the consumer's dollar among the factors
of production. Application of this policy to professional sports, however, pre-
sents special difficulties because, while the teams are in some respects normal
individual economic units seeking to sell a service to the public, economic com-
petition between teams is clearly not acceptable as the sole determinant of
their behavior. Professional sports leagues present a unique form of economic
organization, whose members must compete fiercely in some respects and coop-
erate in others. The end product of the teams is competition on the playing
field. But the demands of producing the best sports competition often require
cooperative action rather than competition in the economic .sphere. Where it is
alleged that the structure of an industry makes such combinations economi-
13* Id. at 782.
^ See, e.g., any Boston newspaper. Oct. 2, 1967. passim.
- There are 20 major league baseball teams. 10 in the National and 10 in the Ameri-
can Leagues ; 25 football teams. 16 in the National Football League (NFL) and 9 in
the American Football League (AFL) : 12 hockey teams in the National Hockey League
(NHL) ; and 12 basketball teams in the National Basketball Association (NBA). A new
eleven-team basketball league began play October 13, 1967 ; the two soccer leagues fin-
ished their first season in 1967 and hope to have 2,3 teams next year.
3 New franchises are planned in baseball, N.Y. Times, Oct. 22, 1967. § 5. at 3, cols.
7-S (two new American League franchises by 1969 ; two new National League fran-
chises probable) ; basketball. N.Y. Times, Nov. 22, 1966, at 50, col. 2 (expansion from
12 to IS teams by 1970) ; and football. Hearings on 8. 3817 Before the Antitrust Sub-
comm. of the House Gomm. on the Judiciary, S9th Cong., 2d Sess,, ser. 22, at 33 (1966)
(26th team by 1968) [hereinafter cited as Foothall Hearings].
■* It has been estimated that the Giants baseball club generated more than $325 mil-
lion in commerce in one year in San Francisco. F.-iCTS, B.\seball in the COMMUNiTr
(issued by the rommissioner of Baseball) C3 (1965). A more conservative valuation
method found a figure of $15 million for the out-of-town commerce brought to Minneap-
olis by the Twins. Id.
^ The Supreme Court has held that all professional sports with the exception of base-
ball are governed bv the antitrust laws. Federal Baseball Club v. National League. 259
U.S. 200 (1922) ; Toolson v. New York Yankees, Inc.. 346 U.S. 356 (1953) ; United
States V. International Boxing Club. 348 U.S. 236 (1955) ; Radovich criticized exception
for baseball, see, e.g.. H. M. Hart & A. Sacks. Thi: Legal Process 1369-71
(tent. ed. 1958). has led to repeated but unsuccessful attempts to make the antitrust
laws apply equally to all sports. Although baseball's antitrust exemption seems to be
permanently established, this Note, in order to consider a wider range of solutions to
the problems common to all professional sports leagues, will treat baseball as it it too
were governed by the antitrust laws.
Negotiation of radio and TV contracts by sports leagues is specifically excluded from
the antitrust laws by statute. 15 U.S.C. § 1291 (1964).
277
cally desirable, the courts have generally decided the lawfulness of its ar-
rangements under the antitrust laws by balancing the alleged economic benefits
against the potential evils and have allowed reasonable restraints, even when
they fall into a category usually regarded as per se illegal.^ This Note will
suggest a pattern for such an antitrust analysis of the following practices of
professional sports leagues : the basic scheduling, rules, and housekeeping mat-
ters involved in league play ; restraints on players ; restraints on entry of new
teams ; and restraints on the sale and movements of franchises. Finally, the
Note will consider the possibility of effective competition between independent
leagues, focusing on the National Football League-American Football League
competition and the problems raised by the merger of the two leagues.
I. SCHEDULING AND PLAYING RULES
The basic "housekeeping" arrangements of league sports such as scheduling,
limits on team rosters, and uniform playing rules throughout the league are
the deviations from a purely competitive model which are most clearly necessi-
tated by the nature of the industry. Were the teams entirely independent com-
peting business entities, they might play more games in cities with a higher
average attendance, and playing rules might be varied from place to place
both to benefit the home team and to increase fan interest. Sports teams, how-
ever, have found it far more interesting to the public and thus more profitable
to compete within a league structure for a league championship. Interest is
thus created not only for the action of the particular game, but for its impact
on the championship race. Additional interest is generated by the changing po-
sitions of the clubs in the league standings, and enthusiasm can be created for
so modest a goal as a "first division" finish. To further this end, "housekeep-
ing" practices are made uniform throughout the league so that the contest for
the league championship is fairer. Teams in a league play under roughly
equivalent conditions ; half their games are played at home and half away,
with a uniform set of rules. And all teams have identical, or nearly identical,
schedules of opponents. Rules of this type are essential to make possible a new
product — league sports — and they produce few, if any, of the undesirable re-
sults of exploitation or misallocation usually associated with restraints on
competition. Thus like the rules considered in Chicago Board of Trade v.
United States ^ or rules standardizing products so that they are interchangea-
ble, the rules standardizing sports competition should be upheld. Although they
involve some deviation from the pattern of free competition, they are economi-
cally justified because they make possible a product, league sports, which un-
limited competition could not produce. However, in addition to these minimum
agreements necessary for sports leagues to function, the teams have adopted
many restrictive arrangements, affecting both control of players and ownership
of teams, which present more troublesome antitrust problems.
II. RESTPvICTIONS ON PLAYERS
All sports leagues exercise rigid control over the industry's labor market by
reserve or option clauses in standardized player contracts and by the player
draft. The reserve and option clauses require the player to negotiate only with
the team he has played for in the past, while the player draft allocates among
the vai'ious teams the right to negotiate with new players. Because there is
normally only one league in each sport,* the two devices taken together mean
that a player must come to terms with the club which holds "rights" to him
or not play the sport.^ The crippling effect these controls have on a player's
« E.fj., Chicaso Bd. of Trade v. United States, 246 U.S. 231 (1918) ; cf. P. Areeda,
Antitrust Analysis 262-0.3 (1967).
'246 U.S. 2.31 (1918) (rule of commodity exchange upheld although it fixed prices
during hours exchange was closed).
^ Because their restrictive arrangements are so closely interlocked, the American and
National Baseball Leagues should be considered economically as a single league. The
same is true for the American and National Football Leagues since their merger.
' The complex minor league systems used in baseball and hockey are integral parts of
the player restraint system in those sports. Bach team controls a large number of play-
ers through its minor league teams, and many players in the farm teams of the better
clubs might be able to play on the major league team of a weaker organization. To give
players a greater opportunity to play in the major leagues, and to help equalize team
strength, the leagues have restricted to some degree the teams' control of minor league
players by limiting the maximum number on the player roster, by waiver rules, optional
278
bargaining power is dramatically illustrated by the case of Ken Harrelson,
wbo was in the extraordinary position of having been leased unconditionally
by the team which held his contract and so was left free to bargain with all
the other teams, finally signing for an estimated $75,000 per year, although
previously he had been receiving only an average salary. lo The effect of these
restraints is further illustrated by a comparison of the salary levels and role
in management accorded to athletes with those of other entertainers, who also
have unique skills in performing for the pxiblic. League athletes, with out-
standing skills, rarely earn more than $100,00 Oper year, and have no say in
management: in contrast, movie stars have salaries many times those of sports
stars and almost unlimited management control. i^
Although it is hard not to believe that one objective of these player re-
straints is simply to reduce the athletes' bargaining power, some restraints on
player mobility can be defended as necessary to preserve balance among the
league's teams. Experience and common sense indicate that fan interest and
profits are greatest when all teams are able to compete effectively for
the league championship. i- In the al)sence of restraints on player movement,
the best players would l)e bought up by the wealthiest teams. Thus the cham-
pionship would be won repeatedly by the teams with the most money availalile
— whetlier from high operating profits or from owners willing to spend heavily
to buy succes.s — while the poorer teams would lose continually. Ultimately, the
poorer teams would be forced out of existence. It could be argued that this de-
cline in the number of teams under the impact of competition merely reduces
the amount of professional sports provided to the level which the public de-
mands. Such a strict competitive view, however, ignores the possibility that
consumer satisfaction would be higher v^ith a large number of relatively
evenly matched teams, even if the quality of play were somewhat below tliat
of a league with a few teams in which the talent was highly concentrated.
Moreover, even the good teams would suffer if some teams in tlie league were
hopelessly outclassed ; the one-sidedness of the contests would cause a general
decline in interest in the sport. It is conceivable that even if there were fi-ee
competition for players, the wealthy teams would, in their own long term self
interest, decline to exploit their power fully : but it seems likely that coopera-
tion is a far more certain way to impose such restraint. For this reason, the
necessity of some control over player movement has been accepted by a House
investigating committee not otherwise sympathetic to the pattern of restraints
in baseball. 13
Professional sports leagues use one of two types of restraints to control
player mobility. Baseball uses a "reserve" clause which in effect binds tlie
player perpetually to one club ; ^* hockey employs a similar arrangement.^^ pi-o-
fessional football relies on a nominally less restrictive "option" clause which
by its terms binds the player for only one year beyond the term of the
contract.i*^ Theoretically, the player can play a second year at 90% of his pre-
vious year's salary and then be free to contract with any other team. But if
another team signs a player who has "played out of his option," the commis-
sioner of the league has power to assign to the player's former club one or
agreements, and the minor leaciie draft. See, e.g.. Major Leajrue Rules 2, 10, 11, 5, 1966
Baseball Blue Book 509. 532, 535, 524 [ hereinafter 1966 Blue Book] ; Profes-
sional Baseball Rules 2 (b). 11. 5. 1966 Blue Book 607. 633, 621; National Asso-
ciation A.srreement arts. 17, 23, 25. 27. 1966 Blub Book 738, 751, 760, 766. These ar-
rangements are too complex to be described in detail here, but they would surely be rel-
evant in .iudsrinfr the reasonableness of the reserve-option restraints.
^" Sports Illustrated, Sept. 4, 1967, at 52.
" See K. MacGowan, Behind the Screen : The History and Technique of the
Motion Picturb 315-16 (1965), Elizabeth Taylor and Richard Burton reportedly receive
a million dollars each per fllin. N.Y. Times, Oct. 3, 1967, at 55, col. 3. Of course, the
difference in salaries may be due to higher profits in other forms of entertainment. There
is, however, no evidence that professional sports are relatively less profitable than movies,
and lower profits would not explain the players' lack of a management role,
'-The 1967 American League four team pennant race raised attendance 6%, while in
the National Leasrne attendance was down 10%, presumably because of the runaway in
the pennant race. N.Y. Times, Sept. 17. 1967. § 5, at 3. col. 2 (city ed,).
" SUROOMM. ON THE STUDY OF MONOPOLY POWER OF THE HOUSE COMM. ON THE
.TuDiciARY. S2d Conc. 2d Ses.s.. REPORT ON ORGANIZED BASEBALL 229 (Comm. Print
1952) [hereinafter cited as 1952 House Baseball Report],
"7^. at 111-27.
^5 National Hockey Leamie Standard Player's Contract § 17 (1965) (copies of standard
plaver contracts in baseball, football, and hockey are on file at Harvard Laiv Reviev).
'" National Football League Standard Player Contract § 10 : American Football League
Standard Players Contract § 10. Most football contracts run for one year.
279
more players from the acquiring club.^^ Thus only superstars can benefit from
the one year option since a team would usually be unwilling to sign a player
of ordinary ability for fear of losing a better player in the "forced trade."
Most owners, probably fearing retaliatory raids more than the forced trade,
have hesitated to ti-y to induce players to play out their options and switch
leagues or teams. Thus football's one year option has been almost as restric-
tive for the players as baseball's perpetual option, although players may make
more effective use of the option in the future.is Basketball apparently uses an
option system similar to football's.!^
The player draft, used in baseball, basketball, and football, is a restraint on
the player's mobility and bargaining power closely allied to the reserve and
oi)tion restraints. While the reserve and option clauses prevent competition
among teams for players already in the league, the draft prevents competition
for new players. Each club selects graduating high school or college athletes,
picking in reverse order of the team's league standing. A player may deal only
with the club which selected him in the draft. The legitimate aim of this sys-
tem is the .same as that of the option, to equalize team strengths by avoiding a
bidding war among the clubs, which would so raise prices that poorer clubs
could not compete effectively for new players. Baseball and hockey operated
for many years without a player draft by developing their own talent in minor
leagues after signing young players at an early stage of their development, bid-
ding in competition witli other teams in the league. In contrast, other sports
drafted college athletes who had already proved their abilities at a high level
of competition ; consequently teams would have been willing to pay them very
high bonuses to sign had there been free bidding for their talents." Eventually,
baseball too decided that its system was leading to competitive imbalance and
excessive bonuses, so a free agent draft was introduced in 1965. Hockey is
planning to hold its first draft in the near future. 20
The baseball draft protects the bargaining rights of the players far better
than other drafts while preserving the aims of the draft — team equalization
and a somewhat lower level of bonuses. This balance is achieved by allowing a
player to be "redrafted" by another club should the club which originally se-
lected him fail to sign him within a limited time. 21 To give effective protection
to the players' rights, the time limit should be short enough that the player
has a real chance to refuse to sign without being forced to make the heavy
sacrifice of not playing for a season. 22
The concerted action involved in the reserve and option restraints and the
draft is analogous to trade association action requiring all members to deal
with customers only on uniform terms, a practice closely scrutinized by the
courts,23 or to a division of the market among buyers.24 Further, the option is
"NFL Const. & By-Laws art. XIL § 12.1 (H) (1966). Although no comparable clause
appears In the AFL constitution, a similar arrangement appears to have been used
when l'>nie Ladd played out his option with San Diego and then signed with Houston.
N.Y. Times, Aug. 28. 19C6, § .5. at 14, col. .5. Even if the commissioner attempts to be
"fair" in the forced trade and does not use it as a device to punish the acquiring team,
the very existence of the provision is — and is intended to be — a deterrent to player mo-
bility.
'* It has been suggested that discontent about salaries has Inspired some football play-
ers to play out their options — or at least threaten to do so — either to pressure their
clubs for higher salaries, or in order to jump to other teams. Ct. N.Y. Times, Aug. 27.
1907. § 5. at 7, col. 1. ' . fe .
"The Nation.al Basketball Association declines to make public its constitution, by-
laws, or standard contracts. However, the existence of an option procedure is Indicated
by newspaper reports that Rick Barry of the San Francisco NBA club has exercised his
option ; he will play In the rival American Basketball Association next season. E.a.,
N.Y. Times, Aug. 9, 1967, at 31. col. 7.
2" Letter from Clarence Campbell, NHL President, to the Harvard Law Review, Oct.
29. 1966.
=1 Major League Rules 4(h)-(j), 1966 Blue Book 519-22. An unsigned player goes
back into the "draft pool" after six months, but a team cannot redraft a player it has
prpviously failed to sign unless he agrees. Major League Rule 4(1), 1966 Blue Book
.523. This rule eliminates the possibility of the league members agreeing not to select
players who had been selected by other teams at earlier drafts, but who had refused to
sign.
" For a good description of the baseball draft, see N.Y. Times, Feb. 28, 1965, § 5, at
2, col. 2. Drafts are held in .January, .Tune, and September. Plavers selected In Juiie and
September go back into the "draft pool" In January, and those" selected in Januarv may
be redrafted In June. Those selected in the fall and winter drafts have no real time
pressure on them to sign because the season is not imminent. Those selected In June,
however, are under excessive pressure to sign because the alternative is to forego play-
ing for a season.
-^ E.fj.. Paramount Famous Lasky Corp. v. United States. 282 U.S. 30 (1930).
2" Cf. United States v. Socony- Vacuum Oil Co., :I10 U.S. 150 (1940).
280
ultimately enforceable against uncooperative players by boycott, a technique
the Supreme Court has termed illegal per se.-^ In Silver v. New York Stock
Exchange,'^ however, the Court suggested that a boycott may be removed from
the per se category by a "justification derived from the policy of another stat-
ute or otherwise." ~" It has been suggested that where collective action is in-
herent in the structure of the industry, as it is in sports leagues, the "or oth-
erwise" justification is present.^s This view draws support from several lower
court decisions.29 In Cowen v. New York Stock Exchange,^^ it was stated that
disciplinary rules of exchanges, l)ecause they were essential to preserve confi-
dence in the integrity of the business, would be judged by the iiile of reason,
and the result would be the same even if there were no implied statutory au-
thorization for the rules.
Thus the antitrust laws should not be interpreted to prevent the professional
teams from making agreements necessary for the industry to function even
where the agreements come within categories labelled illegal per se. However,
recognition that player restraints of some sort are necessary and justified does
not mean that all features of the present system should be held immune from
antitrust attack. Indeed, where defenses are allowed for restraints which
would otherwise be summarily condemned, it is appropriate for courts to re-
quire not only convincing evidence that the restraint genuinely promotes the
ends asserted to justify it but also that these benefits could not be obtained by
devices with less anticompetitive potential. ^i Several alternatives less restric-
tive of the players' rights than the current arrangements seem to be readily
available. The option clause might be made less burdensome by outlawing the
"forced trade" provisions for a player once he has served a short period of
service in the league, and similarly limiting baseball's reserve clause to a short
period. Another alternative would be to abolish the uniform contract provision
containing the option and let the player negotiate separately on this clause.
The player might sign a one year contract but sign a reserve agreement for a
longer period for a separate sum. Thus the dilemma of either giving untried
players a long term contract or running the risk of losing them to other clubs
might be avoided.
These modifications in the existing contracts would ease restraints on player
bargaining power, and it would seem that the professional leagues could still
survive and preserve balance among their teams. The very opportunity to
change teams would give most players the bargaining power to gain their de-
mands without leaving the old club. Even with few^er formal barriers to player
movement, informal factors would tend to limit player movement to managea-
ble proportions. First, in the absence of a much higher offer, habit and inertia
would tend to lead players to stay where they are. Second, established players
are likely to have traded on their status in the community where they perform
to establisyh sources of off-the-field income such as restaurants and radio or
television programs. If such players shifted teams, it is likely that they would
lose these "fringe benefits" until they became established in the new city.
Third, it seems likely that, due to the danger of retaliation, club owners would
refrain from actively seeking players on rival teams and would be reluctant to
sign the players who sought them out. Furthermore, the result of increased
player bargaining power would not necessarily be a highly unstable pyramid-
ing of salaries. The increased economic benefits could take forms tending to
discourage mobility, such as profit sharing plans and insurance policies, which
would be lost if the player went to another team. The teams could also ac-
tively search for ofE-season employment for the players, thus creating addi-
tional local ties. Lastly, a greater use of long-term contracts would cut down
25Klor's. Inc. v. Broadwav-Hale Stores, Inc., 3.59 U.S. 207 (1959); Fashion Origina-
tors' Guild of America v. FTC, 312 U.S. 457 (1941).
26 .•'.73 U.S. 341 (1963>.
*' Irl. at 34S-49 (emphasis added).
2s See Note, Trade Association Exclusionary Practices: An Affirmative Role for the
ijMie 0/ i?eoson. 66 CoLUM. L. Rev. 1486, 1501 (1966).
^Eg. Dessen v. Professional Golfers' Ass'n of America, 358 F.2d 165 (9th Cir.),
cert denied, 3S5 U.S. 846 (1966) ; Molinas v. National Basketball Ass'n, 190 F. Siipp.
241 (SD.N.Y. 1961) (alternative holding). But see Washington State Bowling Proprie-
tors Ass'n V. Pacific Lanes, Inc., 356 F.2d 371 (9th Cir.), cert, denied, 384 U.S. 963
(1966) (applving per se rule to restriction on entry).
="256 F Supp. 462, 468 (N.D.N.Y. 1966), aff'd, 371 F.2d 661 (2d Cir. 1967).
" Cf. White Motor Co. v. United States, 372 U.S. 253, 271-72 (1963) (Brennan, J.,
concurring).
281
on player movement. Since league rules usually prohibit a team from negotiat-
ing with a player under contract with another club,"^ each club would have a
significant advantage in resigning its own players, and if players were offered
attractive new contracts well before their current ones expired, they would
probably sign rather than risk waiting for rival offers. It is often stated that
players on long term contracts do not exert themselves as much as they would
if their next year's salary depended on their performance. However, the seri-
ousness of this problem is belied by the success of more and more established
players in obtaining long term contracts. ^3
The player draft must be subjected to the same rigorous scrutiny as the op-
tion, for it is functionally the same as a system of territorial restraints among
competitors, or outright boycotts, practices customarily termed illegal per se.^^
The baseball draft has proven itself to be a workable alternative to the more
restrictive drafts used in other sports and thus would be required in all
sports. But even its limited restraints must be analayzed in conjunction with
the regime of restraints to which a player becomes subject once he signs a
contract, and at least a minimal opportunity to deal with more than one team
should be assured. For, as indicated above, such a system need not lead to
wholesale player movement and competitive imbalance. Further, other devices
are available to promote equalization of team strengths without so restricting
tlie rights of the players. Two such devices are hockey's draft of players on
other major league clubs ^s and a prohibition of trades for a given period be-
fore "cut down" date, which would enable the weaker teams to acquire players
cut from the better clubs without the better club being able to demand a
player or draft choice in trade shortly before the cut down date.^^ These meth-
ods, however, would not even out the supply of stars.
Another restraint on players is the league's power to blacklist. This power
has been upheld over antitrust objections when used to protect the integrity of
the sport by disciplining players accused of gambling.^^ There the benefit of
the restraint was obvious — pi-eservation of public confidence in the competition
on the playing field — and the activity prohibited, gambling, was illegal. -^^ But,
because of the possibility of abuse inherent in this kind of private criminal
law making, no matter how laudable the purpose, it would seem appropriate at
least to require procedural safeguards such as notice and hearing.^a Moreover,
use of boycotts should be strictly limited to those cases where the purpose is
clearly legitimate. Blacklisting has in the past sometimes been used to protect
the position of the existing leagues by prohibiting employment of players who
have once played in rival leagues. This practice has not, apparently, been eval-
uated by the courts,'*'^ but such use of monopoly power to drive out competition
is precisely the evil the antitrust laws were designed to prevent, and should be
held illegal.41
III. RESTRAINTS OX OWNERS AND POTENTIAL OWNERS
A. Entry
The clubs are the profit-making, and, in many respects, the decision-making
units in professional sports ; the league, a nonprofit association made up of the
''-E.g., National Leaaue Const. & Rules art. 10.1.3 (1962); AFL By-Laws art. VIII,
§ 1, item 5 (19G4) ; NHL By-Laws § 15.1 (19G6). Such prohibitions are justified, at least
if they apply only through the last playing season for which the player is bound ,by
the potential conflict of interest facing an athlete playing against a team with which he
is negotiating at the time.
"^ For e.xample, long term contracts were recently signed by Jurgenson at the Wash-
ington NFL team (three years), Washington Post, July 1.3, 1967, § C, at 4, cols. 3-8;
and Debnsschere of the Detroit NBA team (five years), N.Y. Times, Sept. 13, 1967. at
54, col. 6.
^E.g., Timken Roller Bearing Co. v. United States, 341 U.S. 593 (1951) ; Klor's, Inc.
V. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959).
3- NHL By-Laws § 16A (1966).
^^ See Sports Illdsth.^ted, Sept. 18, 1967, at 49.
"Molinas v. National Basketball Ass'n, 190 F. Supp. 241 (S.D.N.Y. 1961).
38 Cf. Cement Mfrs. Protective Ass'n v. United States, 268 U.S. 588 (1925) (upholding
collective action to prevent fraudulent action by buyers).
'» Silver v. New York Stock Exch., 373 U.S. 341, 364-65 (1963); Note, supra, note
28, at 1508-10.
^"In Gardella v. Chandler, 172 F.2d 402 (2d Cir. 1949), an allegation of a blacklist
was held to state a cause of action, but the case was subsequently settled ; see Daley,
Sports of the Times, N.Y. Times, Sept. 18, 1967, at 64, cols. 2-3. Other cases were
foreclosed when the Toolson decision confirmed baseball's exemption from the antitrust
laws.
" Cf. Fashion Originators' Guild of America v. FTC, 312 U.S. 457 (1941).
282
member cluhs, however, provides the framework within which the individnal
clubs provide their "product," league sports. Entry into sports leagues and
hence into the industry is by no means free. Generally, new entrants are ad-
mitted only if a higli percentage of the member clubs vote to admit the
applicant.42 As an organization which makes possible a product no single unit
could produce, a league is comparable to a joint venture; as a group which
sets standards for the industry and regulates competition among the clubs, it
is comparable to a trade association. Usually when the structure of an indus-
try justifies anticompetitive cooperation through a trade association, the courts
require at least that the organization be open equally to all reasonably quali-
fied persons or firms who seek membership's go that the market rather than
the self interest of those already in the business will determine the number of
firms in the industry.
Despite this general rule, absolutely free entry is not, and scarcely could be,
required of sports leagues.** A new sports team deals with the existing teams
as well as with the public. At the very least, they must include it on their
schedules and. under existing league structures, they must also share certain
revenues with it. These relationships would justify controls on entry which
would be unaeceptably where a new entrant would be a completely independ-
ent unit. A further justification for entry controls arises from the pervasive
problem of maintaining a balance of team strengths, which must be done dur-
ing expansion of the league as well as in normal operation. The existing teams
control the current players through the option restraints described above. If
the new teams were forced to build from new talent alone, it would take years
for them to give the established teams a real contest, and in the meantime the
entire league would suffer from a lack of interest in one-sided contests. To
avoid this situation— which would probably mean virtually no expansion of ex-
isting leagues— the leagues stock new teams from existing teams.'s Obviously,
the existing teams cannot be required to transfer players to a prospective en-
trant at his mere request, so existing clubs can legitimately defend some con-
trol over the frequency of expansion and the beneficiaries of the transfers.
The exercise of this legitimate control over entry should, however, be care-
fully examined, for there would seem to be a built-in bias against expansion,
which would bring dilution of the existing teams' position as one of a very
few suppliers of a highly demanded service. More specifically, an increase in
the number of teams would mean a smaller percentage of shared television
and other revenues for each,*^ and a division of publicity and interest among
more units. In addition, if more than one city or syndicate is bidding for a
new franchise, the power of the league to choose the successful applicant is
subject to abuse.*'^ .
Many of the problems associated with more rapid expansion seem surmount-
able. If balance is maintained, the dilution in ability of players seems not to
affect the fans' interest in a sport ; professional football is booming although it
has gone from 12 to 25 teams in the last seven years, with an inevitable dis-
persion of talent. Similarly, more teams need not mean a fatal decline in the
excitement of the championship race; the league can be divided into smaller
conferences, as the NFL has been this year, giving teams a chance to compete
for lower level "championships" as well as for the ultimate prize as the best
professional team in the sport.
*'-E American Leapue Const, art. 3.1(b) (1966) (three-fourths): NFL Const, art.
.Sl(b) Vl966) (vote of 13 of 16 members) ; NHL Const, art. 3.3 (1947) (three-foiirths).
"^•is'see Associated Press v. United States, 326 U.S. 1 (1945) ; United States v. Termi-
°^«^p^Dee'se'n v"^Pn)fessional Golfers' Ass'n of America, 358 F.2d 165 (9th Cir.), cert,
denied 385 US 846 (1966) (upholdinjr reasonable limits on PGA membership) ; Note,
Concerted Refusals To Deal Under the Federal Antitrust Laws, 71 Harv. L. Rev. 1o31,
'^45 The usual procedure Is for the Bew club to pay a fee for the privilege of picliing
some of the less talented players from the rosters of the established clubs
« Of course If expansion produced higher total revenues the actual Income of each
team from shared sources would not decline. Lil^e other oligopolists, however, club own-
ers may prefer stability at low total income to the uncertainties of expanding the mar-
'^"'^ In the recent National Hockey League expansion, a franchise was granted to St.
Louis even though there were no applicants from that city, while appUcations from
other cities were rejected. It has been reported that this was done as a favor to James
Norris owner of the St. Louis arena and principal owner of the Chicago Black Hawks.
N Y. Times, Feb. 10, 1966, at 45, col. 2.
283
It is a customary objective of antitrust law to promote free entry and ex-
pansion of supply as demand rises. Accordingly, in principle, a league should
be required by the courts to base its decisions about expansion on how fast
the league can expand without serious injury to the sport as a whole and to
allocate new franchises on the basis of a rational comparison among
applicants.-*® These standards would, however, be extremely difficult for a court
to apply, except in extreme cases. To avoid the uncertainties of judicial super-
vision of the details of expansion, it might be appropriate to leave expansion
decisions to the existing league, but use antitrust policy to foster new
leagues.49 Historically, existing leagues have reacted to competition by expan-
sion, so even if the new league did not survive, there would be a greater num-
ber of teams than before.
B. Sale of Franchises
Restrictions on the sale of franchises are of two types : an absolute prohibi-
tion of certain classes of owners,^" and a requirement that all sales be
approved by the league. °i These controls by competitors over sale of teams
could be defended as protecting the integrity of the sport by preventing gam-
bling interests from acquiring teams, by barring a single individual from own-
ing two supposedly competing teams, and by guarding against other forms of
conflict of interest. In addition, supervision of sales by the other teams might
insure that the new owner had finances strong enough to support a competitive
team and to enable him to look to the long run interest of the sport.
One may, however, be skeptical whether the other league owners are efficient
at detecting potential illegal ownership or conflicting interests,52 and they may
not themselves be very convincing in the role of disinterested advocates of
their sports' long run good. Some of the restrictions, such as the NFL's policy
of no corporate ownership, seem unrelated to any identifiable purpose, except
perhaps to preserve the romantic "sport, not a business" atmosphere. Many of
the legitimate controls or transfer of ownership — no gamblers, owners of other
teams, or under-financed buyers — could be secured by league rule, enforceable
by injunction, without subjecting every sale to general review by the other
owners. Restraints on leaving any business tend to discourage entry, and expe-
rience in .sports suggests that the sale restrictions are easily subject to abuse,
for the power has been used to punish mavericks in a league and to interfere
with the business decisions of potential buyers.s^ The tenuousness of the al-
leged legitimate purposes, the availability of alternatives, the serious restric-
tive effects on entry, and the possibility of abuse all suggest that these re-
straints on .sale are not sufficiently justified by the iieculiarities of the industry
to survive antitrust challenge.
C Movement of Franchises
Another set of restraints limits an owner's ability to move his fi'anchise.
One league prohibits moving teams altogether ; ^4 the others require that moves
be approved by an extraordinary majority of the owners. ^^ If the proposed
move is to an area near an existing team, there is usually provision for a veto
*s C/. Deesen v. Professional Golfers' Ass'n of America, 358 F.2d 165 (9th Clr.), cert,
denied, 385 U.S. 846 (1966).
*^ For a further discussion of competition among leagues, see pp. 430-34 infra.
"" "No corporation, association, partnership or other entity not operated for profit nor
any charitable organization or entity not presently admitted to membership In the
League shall be eligible for membership." NFL Const, art. 3.2(a) (1966). The NFL also
has an informal policy In favor of majority ownership by one Individual who Is not pri-
marily motivated by tax loss objectives. Football Hearing.^ at 116.
^* Usually a vote greater than a majority is needed. National League Const. & Rules
arts. 3.4 (1962), 3.15 (not Included in printed constitution dated March, 1962) (three-
fourths) ; American League Const, arts. 3.6(a), 3.16 (1966) (generally three-fourths) ;
NFL Const, art. 3.5(b) (1966) (13 of 16 members) ; AFL By-Laws art. 4, § 6 (1964)
(three-fourths) ; NHL Const, art. 3.5 (1947) (three-fourths).
" The supposed policy against conflicts of interest did not prevent the sale of the
New York Yankees to CBS. In any event, the anticompetitive implications, if any, of
such "vertical" mergers in the entertainment field are probably better left to public
scrutiny under the Clayton Act.
" The sale of the Philadelphia Athletics baseball team is an example of the use of the
veto power to force the sale of the team to a man who would move the team rather
than to a group that would have kept the team in Philadelphia. See N.Y. Times, Oct.
16. 1954, at 20, col. 1 ; Oct. 18, 1954, at 1, col. 7 ; Oct. 29, 1954, at 30 col. 1 ; Nov. 5,
1954. at 25, col. 1 ; Nov. 9, 1954, at 33, col. 1.
5* NHL Const, art. 4.2 (1947).
"National League Const. & Rules art. 3.1 (1962) (three-fourths); American League
Const, art. 3.2 (1966) (three-fourths); Major League Rules 1(c)(1), 1966 Blue
284
by that team.ss Territorial restraints are traditionally considered per se
illegal,57 for the division of markets necessary has the effect of eliminating
competition. There seems to be no reason why these restraints are particularly
justified in the sports context, at least when a team is moving into virgin ter-
ritory. Control of movement is somewhat more justified in the case of a team
wishing to move into a city already occupied by another team, since the in-
cumbent team might be sufficiently weakened by the competition to weaken the
entire league. In most cases, however, the economic self interest of the moving
team would seem sufficient to avoid burdening an area with more teams than
it can support, and it is highly unlikely that a team would move into a city
capable of supporting only one team with the intent of pushing out an estab-
lished team, for the old team would have the benefit of established loyalties
and. probably, the best stadium or arena.
With jet travel, scheduling would seem to be feasible no matter where the
team located within the United States or Canada.^s Further, the vagueness of
the rule makes it prone to use as a weapon of reprisal against unpopular
owners.59 The only defensible argument for the rule is that fan loyalty and
trust will be lost if teams move fi'om city to city despite adequate support.
But when that very case has arisen— the shift of an adequately supported
franchise in the hope of making a fast buck— both baseball leagues have al-
lowed the move.«o Indeed, owners are unlikely to take a stand to protect the
fans' interests since they may wish to move their franchises in the future.
Thus, devices which restrict an owner's ability to shift his franchise — at least
to a new territory — should be held illegal.'^i
IV. AN ALTERNATIVE : COMPETITION BETWEEN LEAGUES
This Note has suggested that professional sports could probably be required
to modify their practices in several important respects to comply with the an-
BooK 507 (when one major league club wishes to enter a city with a population less
than 2.400,000 in which the other league has a club, it must obtain the consent ot
three-fourths of the clubs in the other league) ; NFL Const, art. 4.2(A) (1966) (IS ot
16 members) ; AFL By-Laws art. 4, § 6 (1964) (three-fourths vote for sale of fran-
chise ; would probably be construed to cover franchise shifts as well).
^8 National League Const. & Rules art. 3.2 (1962) (ten miles) ; American League
Const, art. .3.2 (1966) (one hundred miles); Major League Rules 1(c) (1) (m), 1966
Blue Book 507 (club of one league cannot move within five miles of the stadium of a
club in other league unless that club agrees) ; NFL Const, arts. 4.1. 4.3 (1966) (gener-
ally an exclusive right to play football within 75 miles) ; AFL By-Laws art. 4, ^ -i
(1964) (city in which the club plays) ; NHL Const, art. 4.1(c) (1947) (fifty miles).
^■^ See. e.o.. Timken Roller Bearing Co. v. United States, 341 U.S. 593 (19t)l). Bm«
see United States v. National Football League, 116 F. Supp. 319, 322 (E.D. Pa. 1953)
(upholding a prohibition of TV coverage within 75 miles of a city where a league game
Is being played). , , » ».. • tt •• „„/i
5s The Pacific Coast League, a baseball minor league, has a franchise in Hawaii and
seeks to survive the attendant problems of scheduling and transportation costs.
^^ Bill Veeck who had antagonized his fellow club owners by his irreverent approach
to baseball and his demand for a sharing of television revenues, was blocked in repeated
efforts to move his team to a more profitable location. N.Y. Times, Mar. 4, 1953, at 32,
col 5 • Mar 17, 1953, at 32, col. 1 ; Sept. 28, 1953, at 28, col. 1. Only after he sold the
club was approval granted for it to move. N.Y. Times, Sept. 30, 1953, at 1, col. 4 Re-
portedly only a threat of antitrust suit secured the votes to approve the move of the
team of another maverick. Charles O. Finley, from Kansas City to Oakland. Daley,
Sports of the Times, N.Y. Times, Sept. 18, 1967, at 64, cols. 2-4; N.Y. Times, Oct. 20,
1967. at 59, col. 1 (city ed.). , ^ ^ ,,., , 4. a+i <•„
60 -T^he most recent example was the shift of the Braves from Milwaukee to Atlanta
despite extraordinary although somewhat declining support in Milwaukee. Brief for Re-
spondent at 2, State v. Milwaukee Braves, Inc., 31 Wis. 2d 699, 144 N.W.2d 1, cert, de-
nied 385 U S 990 (1966). The American League allowed Calvin Griffith to move a prom-
ising club from Washington to Minneapolis-St. Paul before the 1961 season even
though Washington fans had given the club enough support to quintuple the value of
the stock in the eight vears before the move despite the team's chronic place in the sec-
ond division. Washington Post, Oct. 30, 1960, § C, at 3, col. 5.
«i An owner would of course have standing to challenge a league decision preventing
him from moving. Perhaps the city to which the aborted move would have been made
could also sue, alleging lost commence.